Question

Best Shoe Company makes loafers. During the most recent year, Best incurred total manufacturing costs of $24,100,000. Of this amount, $1,900,000 was direct materials used and $17,800,000 was direct labor. Beginning balances for the year were Direct Materials, $800,000; Work-in-Process Inventory, $1,400,000; and Finished Goods Inventory, $1,200,000. At the end of the year, balances were Direct Materials, $900,000; Work-in-Process Inventory, $1,300,000; and Finished Goods Inventory, $1,210,000 Read the requirements. Requirement 1. Analyze the inventory accounts to determine the cost of direct materials purchased during the year. Direct Materials Direct Materials Used Beginning Direct Materials Ending Direct Materials Purchases Requirement 2. Analyze the inventory accounts to determine the cost of goods manufactured for the year

Answer 1

Answer

• Requirement 1

A	Direct Material used	$1,900,000
B	Beginning Direct Materials	$800,000
C	Ending Direct Materials	$900,000
D = A + C - B	Purchases	$2,000,000

• Requirement 2

A	Beginning WIP Inventory		$1,400,000
B	Direct Material used	$1,900,000
C	Direct Labor	$17,800,000
D = E - B - C	Manufacturing Overhead	$4,400,000
E	Total manufacturing cost incurred during the year		$24,100,000
F = A+E	Total manufacturing cost to account for		$25,500,000
G	Ending WIP Inventory		$1,300,000 [to be deducted]
H = F - G	Cost of Goods manufactured		$24,200,000

• Requirement 3

A	Beginning finished goods inventory	$1,200,000
B	Cost of Goods manufactured	$24,200,000
C = A+B	Cost of Goods Available for sale	$25,400,000
D	Ending Finished Goods Inventory	$1,210,000
E = C - D	Cost of Goods Sold	$24,190,000