Johnson Broth and left the numbers ssing records, computing inventory costs. Ron

Question

Johnson Broth and left the numbers ssing records, computing inventory costs. Ron Howard recently took over as the controller of ers Manufacturing. Last month, the previous controller left the company with little notice accounting records in disarray. Ron needs the ending inventory balances to report first-quarter For the previous month (March 2014) Ron was able to piece together the following information: Direct materials purchased Work-in-process inventory, 3/1/2014 Direct materials inventory,3/1/2014 Finished goods inventory, 3/1/2014 Conversion costs Total manufacturing costs added during the period Cost of goods manufactured Gross margin as a percentage of revenues Revenues $120,000 S 35,000 $ 12, 500 $160,000 $330,000 $420,000 4 times direct materials used 20% $518,750 Calculate the cost of: 1. Finished goods inventory, 3/31/2014 2. Work-in-process inventory, 3/31/2014 3. Direct materials inventory, 3/31/2014

Explanation / Answer

1. Finished goods inventory, 3/31/2014 = $105000

2. Work-in-process inventory, 3/31/2014 = $95000

3. Direct materials inventory, 3/31/2014 = $42500

Explanation;

Direct materials, 3/1/2014

$12500

Direct materials purchased

$120000

Direct materials available for sale

$132500

Direct materials, 3/31/2014

$42500

Direct materials used

$90000

Conversion costs

$330000

Manufacturing costs added during the period

$420000

+ Work-in-process, 3/1/2014

$35000

Manufacturing costs to account for

$455000

- Work-in-process, 3/31/2014

($95000)

Cost of goods manufactured

$360000

+ Finished goods inventory, 3/1/2014

$160000

Cost of goods available for sale

$520000

- Finished goods inventory, 3/31/2014

($105000)

Cost of goods sold ($518750 * 0.80)

$415000

  

Working Note;

1. Direct materials used will be calculated as follow;

Manufacturing costs added during the period

$420000

Less: Conversion costs

($330000)

Direct materials used

$90000

           

2. Cost of goods manufactured will be calculated as follow;

Cost of goods manufactured ($90000 * 4) = $360000

Direct materials, 3/1/2014

$12500

Direct materials purchased

$120000

Direct materials available for sale

$132500

Direct materials, 3/31/2014

$42500

Direct materials used

$90000

Conversion costs

$330000

Manufacturing costs added during the period

$420000

+ Work-in-process, 3/1/2014

$35000

Manufacturing costs to account for

$455000

- Work-in-process, 3/31/2014

($95000)

Cost of goods manufactured

$360000

+ Finished goods inventory, 3/1/2014

$160000

Cost of goods available for sale

$520000

- Finished goods inventory, 3/31/2014

($105000)

Cost of goods sold ($518750 * 0.80)

$415000

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