On January 31, a snowstorm damaged the office of a small business, and some of the...
On January 31, a snowstorm damaged the office of a small business, and some of the accounting information stored in the computer’s memory was lost. The following information pertaining to January activities was retrieved from other sources:
Direct materials purchased $18,000
Work in process—beginning inventory 2,000
Direct materials—beginning inventory 6,000
Direct materials—ending inventory 10,000
Finished goods—beginning inventory 12,000
Finished goods—ending inventory 2,500
Sales 60,000
Manufacturing overhead and direct labour incurred 22,000
Gross profit percentage based on net sales 40 %
a.What was the cost of direct materials used in January?
b.What amount of work in process inventory was transferred out to finished goods during January?
c. Assume that $20,000 of direct materials was used in January and that the cost of goods available for sale in January amounted to $40,000. What did the ending work in process inventory amount to?
Homework Answers
a) Direct material used = Beginning inventory+Purchase-Ending inventory = 6000+18000-10000 = 14000
b) Work in process transferred out to finished goods =
Cost of goods sold = 60000*60% = 36000
Work in process transferred out to finished goods = 36000+2500-12000 = 26500
c) Cost of goods manufactured = 40000-12000 = 28000
Ending work in process = 2000+20000+22000-28000 = 16000
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