Statement of Cost of Goods Manufactured from Percent Relationships Information a

Question

Statement of Cost of Goods
Manufactured from Percent Relationships
Information about NuWay Products Company for the year ending December 31, 2010, follows:

Sales equal $500,000.

Direct materials used total $56,000.

Manufacturing overhead is 150 percent of direct labor dollars.

The beginning inventory of finished goods is 20 percent of the cost of goods sold.

The ending inventory of finished goods is twice the beginning inventory.

The gross profit is 20 percent of sales.

There is no beginning or ending work-in-process.

Prepare a statement of cost of goods manufactured for 2010. (Hint: Prepare an analysis of changes in Finished Goods Inventory.)

Enter a negative sign with your answer for Finished goods, 12/31/10.

Explanation / Answer

Current manufacturing costs:     Direct materials            56000     Direct labor (5) 254400     Manufacturing overhead (6) 169600 480000 Beginning work-in-process 0 Total costs in process 480000 Ending work-in-process 0 Cost of goods manufactured 480000 Analysis of Finished Goods Inventory:     Finished goods, 1/1/10 (2) 80000     Cost of goods manufactured (4) 480000     Total goods available for sale    560000     Finished goods, 12/31/10 (3) 160000     Cost of goods sold (1) 400000 (1) Cost of goods sold = [$500000 ´ (1.00 - 0.20)] 400000 (2) Beginning inventory = ($400,000 ´ 0.20) 80000 (3) Ending inventory = ($80,000 ´ 2) 160000 (4) Cost of goods manufactured = ($560000 - $80,000) 480000 (5) Direct labor = [($480,000 - $56,000)/2.50] 169600 (6) Manufacturing overhead = ($169,600 ´ 1.5) 254400

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