Question

The following information was taken from the accounting records of Elliott Manufacturing Corp. Unfortunately, some of the data were destroyed by a computer malfunction.

Sales Revenue	$	65,500
Finished Goods Inventory, Beginning		11,500
Finished Goods Inventory, Ending		8,000
Cost of Goods Sold		?
Gross Margin		31,500
Direct Materials Used		11,500
Selling and Administrative Expense		?
Operating Income		16,000
Work-in-Process Inventory, Beginning		?
Work-in-Process Inventory, Ending		6,500
Direct Labor Used		9,750
Factory Overhead		13,000
Total Manufacturing Cost		?
Cost of Goods Manufactured		?

Work in process inventory, beginning, is calculated to be:

Multiple Choice

• $9,750.

• $13,000.

• $15,750.

• $9,850.

Answer 1

Answer: Work-in process inventory, beginning = $2,750

.

Working note 1

Gross Margin          = Sales revenue – Cost of Goods Sold

Cost of Goods Sold = Sales revenue – Gross Margin

                                 = $65,500 – $31,500

                                 = $34,000

Working note 2

Cost of Goods Sold = Beginning finished goods inventory + Cost of Goods Manufactured – Ending finished goods inventory

Cost of Goods Manufactured = Cost of Goods Sold – Beginning finished goods inventory + Ending finished goods inventory

                                               = $34,000 – $11,500 + $8,000

                                               = $30,500

Calculation of ending work-in-process inventory

Cost of Goods Manufactured = Beginning working in process + Direct materials used + Direct labor used + Factory overhead - Ending working in process

Beginning working in process = Cost of Goods Manufactured – Direct materials used – Direct labor used – Factory overhead + Ending working in process

= $30,500 – $11,500 – $9,750 – $13,000 + $6,500

                                                 = $2,750