The following data (in thousands of dollars) have been taken from the accounting

Question

The following data (in thousands of dollars) have been taken from the accounting records of Karmana Corporation for the just-completed year.

Sales ...............................................................................................$1,500

Raw materials inventory, beginning ...............................................$20

Raw materials inventory, ending ..........................,.........................$40

Purchases of raw materials .............................................................$150

Direct labor .......................................................................................$180

Manufacturing overhead ...............................................................$250

Administrative expenses ...............................................................$100

Selling expenses .............................................................................$140

Work-in-process inventory, beginning ........................................$80

Work-in-process inventory, ending .............................................$50

Finished goods inventory, beginning ........................................$125

Finished goods inventory, ending ...............................................$60

Use these data to prepare (in thousands of dollars) a schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold for the year. In addition, elaborate on the relationship between these schedules as they relate to the flow of product costs in a manufacturing company.

Explanation / Answer

  Karmana Corporation

Shedule for cost of goods manufacture

Direct materials:

Beginning raw materials $20

(+) Net purchase of raw material   $150

Raw material available $170

(-) Ending raw material $40

Raw material transferred to production $130

Direct labour $180

Factory overhead

Manufacturing overhead $250

Total Manufacturing cost $560

(+)Beginning work in process inventory $80

(-)Ending work in process inventory $50

COST OF GOODS MANUFACTURE $530

   Karmana Corporation

Schedule of Cost of Goods Sold

Beginning inventory of raw material $20

Beginning inventory of Work-in-process $80

Beginning inventory of Finished goods $125

Purchase $150

Cost of purchase $375

(-) Ending inventory of raw material $40

(-) Ending inventory of  Work-in-process $50

(-) Ending inventory of Finished goods $60

COST OF GOODS SOLD $125

Indirect material

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