After preparing for your managerial accounting exam, you confidently turn to you

Question

After preparing for your managerial accounting exam, you confidently turn to your roommate and declare, "I think I've finally figured out how product costs flow through the various accounts and how they are reflected on income statements and balance sheets." Upon hearing this wonderful news, your roommate responds, "Hey, if you really want to test your understanding of product costing, try working a problem my old prof gave me." After rummaging for fifteen minutes through various files, folders, and shelves, your roommate slaps a sheet of paper in front of you and explains that the sheet contains information pertaining to one year of operations for the Lange Manufacturing Company. The sheet contains the following information. Beginning Inventory, Direct Materials Ending Inventory, Direct Materials Direct Materials Used Sales Beginning Inventory, Work in Process Ending Inventory, Work in Process Cost of Goods Manufactured Actual Manufacturing Overhead Selling and Administrative Expenses Beginning Inventory, Finished Goods Ending Inventory, Finished Goods Beginning Balance, Property, Plant& Equipmernt Ending Balance, Property, Plant & Equipment Applied Manufacturing Overhead (80 percent of direct labor cost) 12,500 21,000 195,000 485,000 62,000 82,000 415,000 165,000 82,500 92,000 83,000 255,000 262,000

Explanation / Answer

Schedule of cost of goods manufactured Particulars Amount Amount Note Direct material inventory on Jan 1 12500 Add: Purchases 203500 Answer to Q.1 Total direct material available 216000 Direct material inventory on Dec 31 21000 Direct materails used 195000 Direct labor 240000 Answer to Q.2 Manufacturing cost 435000 Beginning WIP 62000 Closing WIP 82000 Cost of goods manufactured 415000 Applied over head 80% of labor 192000 Answer to Q.3 Beginning finished goods 92000 Add: Cost of goods manufactured 415000 Cost of goods available for sale 507000 Finished goods inventory 83000 Cost of goods sold 424000 Answer to Q.4

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