Question

36. Each finished product of Carolina Cup requires two pounds of Product A and five pounds of Product B. Throughout the year, the company purchases enough raw materials to produce 500 finished products. Each pound of Product A costs $7, and each pound of Product B costs $8. The beginning and ending balances of raw materials inventory totaled $8,900 and $10,100, respectively. Calculate the cost of direct materials used for the year. 37. Carolina Cup employs five production employees who are paid an hourly wage of $9 per hour. Each employee works 800 hours a year. The company also incurred $42,000 of overhead, half of which should be allocated to the factory. Using the cost of direct materials calculated in Exercise 36, determine the total manufacturing costs for the year. 38. Carolina Cup's beginning work in process inventory had a balance of $45,750. The ending work in process inventory was exactly 2/3 of the beginning balance. Using the manufacturing costs incurred calculated in Exercise 37, determine the cost of goods manufactured during the year.

Answer 1

solution

Qn. 36

Calculation of Cost of Raw materials purchased

Raw material requirement for one Finished Product = Two pounds of product A & Five pounds of product B

So raw materials required to produce 500 Finished products = 1000 pounds of product A (ie. 2 x 500) and 2500 pounds of product B (ie. 5 x 500)

Cost of Raw Material - Product A = 1000 x $7

= $ 7,000

Cost of Raw material Product B = 2500 x $8

= $ 20,000

So Total cost of Raw Materials purchased = $ 27,000 ( ie. 7000+20000)

Calculation of Cost of Direct materials used for the year

Opening Stock of Raw material = $ 8,900

Add cost of raw materials purchased = $ 27,000

Total = $ 35,900

Less Closing Stock of Raw materials = $ 10,100

So Cost of Direct Materials used = $ 25,800

Qn.37

Calculation of Wages Paid

Number of hours worked by each employee x Rate per hour x number of employees

So wages paid =  800 x $ 9 x 5

  = $ 36,000

Overheads allocated to factory = 1/2 of $ 42000

= 21,000

So Total Manufacturing Cost = Cost of Direct materials used + Direct wages + Overheads allocated to factory

= $ 25,800 + 36,000 + 21,000

Total Manufacturing cost   = $ 82,800

Qn 38

Calculation of Cost of Goods Manufactured during the year

Beginning Work in process inventory + Manufacturing cost - ending work in Process

So Cost of goods manufactured during the year    = $ 45,750 + 82,800 - 30500 (ie. $ 45,750 x 2/3)

So Cost of goods Manufactured during the year = $ 98050