34. LO.6 (CGM; CGS) the cost of goods sold in March 2008 forReggae Rocks Co. was

Question

34. LO.6 (CGM; CGS) the cost of goods sold in March 2008 forReggae Rocks Co. was $2,300,000. March 31 work in process inventorywas 40 percent of the march 1 work in process inventory. Overheadwas 225 percent of direct labor cost. During March, $1,182,000 ofdirect material was purchased. Other March information follows:

Inventories                          March1                                March31

DirectMaterial                   $30,000                                 $42,000

Work inprocess                 90,000                                    ?

FinishedGoods                  125,000                                  24,000

a.       Prepare a schedule of thecost of goods sold for March.

b.      Prepare the march cost of goodsmanufactured schedule

c.       What was the amount ofprime cost incurred in March?

d.      What was the amount ofconversion cost incurred in March?

Explanation / Answer

   Finished Goods Inventory, March1 $125,000 Add : Cost of goods manufactured         ($2,300,000 +$24,000 - $125,000)     $2,199,000 Total Finished goods available for sale $1,112,000 Less : Finished Goods March 31 ($24,000)    Cost of goods sold as given $2,300,000    Finished Goods Inventory, March1 $125,000 Add : Cost of goods manufactured         ($2,300,000 +$24,000 - $125,000)     $2,199,000 Total Finished goods available for sale $1,112,000 Less : Finished Goods March 31 ($24,000)    Cost of goods sold as given $2,300,000
b.      Prepare the march cost of goodsmanufactured schedule Work in process March 1 $90,000 Manufacturing Cost :    Direct materialsused       Direct Material March1 $30,000      Add: Purchases $1,182,000 Total directy materials available $1,212,000     Less : Direct Material March31 (42,000) Total directy materials used $1,170,000 Direct Labor ($2,199,000+$36,000-$1,170,000 - $90,000) x 100 / 325 $300,000 Manufacturing Overhead ($2,199,000+$36,000-$1,170,000 - $90,000) x 225 / 325 $675,000 $2,145,000 Total cost to be accounted for $2,235,000 Less : Work in process March 31 ($90,000 x 40%) ($36,000) Cost of goods manufactured $2,199,000 Work in process March 1 $90,000 Manufacturing Cost :    Direct materialsused       Direct Material March1 $30,000      Add: Purchases $1,182,000 Total directy materials available $1,212,000     Less : Direct Material March31 (42,000) Total directy materials used $1,170,000 Direct Labor ($2,199,000+$36,000-$1,170,000 - $90,000) x 100 / 325 $300,000 Manufacturing Overhead ($2,199,000+$36,000-$1,170,000 - $90,000) x 225 / 325 $675,000 $2,145,000 Total cost to be accounted for $2,235,000 Less : Work in process March 31 ($90,000 x 40%) ($36,000) Cost of goods manufactured $2,199,000 _________________________________________________________________________________________
c. What was the amount of prime cost incurred in March?       Prime Cost = Directmaterials + Direct labor = $1,170,000 + $300,000 =$1,470,000 __________________________________________________________________________________________ d.  What was the amount of conversion cost incurredin March?       ConcersionCost      =   Directlabor + Manufacturingoverhead   =   $300,000 +$675,000   =   $975,000          
   Finished Goods Inventory, March1 $125,000 Add : Cost of goods manufactured         ($2,300,000 +$24,000 - $125,000)     $2,199,000 Total Finished goods available for sale $1,112,000 Less : Finished Goods March 31 ($24,000)    Cost of goods sold as given $2,300,000

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