Question

can you please explain how reconciliation section works here? thanks.

PROBLEM 1 GIVEN 1.800 9,500 (A) BEGINNING RM COST RM PURCHASED ENDING RM BEGINNING WIP 2.150 (A) (A) OIH 3,500 12.800 4,350 4,200 7.500 6,100 ENDING WIP BEGINNING FG ENDING FG REQUIRED: PREPARE RM, WIP AND FG ANALYSIS RM: BEG RM ADD RM PURCH RM AVAIL LESS ENDING RM RM USED IN PRODUCTION 1,800 9.500 11,300 -2,150 9.150 WIP: BEG WIP ADD RM USED IN PRODUCTION ADD DL USED IN PRODUCTION ADD OH USED IN PRODUCTION TOTAL COST OF WIP LESS ENDING WIP COGM 3,500 9,150 12,800 4,350 29,800 4,200 25,600 FG: BEG FG ADD COGM GAFS LESS ENDING FG COGS 7,500 25,600 33, 100 -6.100 27,000 RECONCILIATION TOTAL RM PURCHASES, DIRECT LABOR & MFG OVERHEAD (SUM A) 26,650 RM INV CHANGE (INCREASEVDECREASE WIP INV CHANGE (INCREASE DECREASE FG INV CHANGE (INCREASE YDECREASE -350 -700 1,400 COGS 27,000

Answer 1

Answer:

We know that ,

RM used = Beginning RM inventory + RM purchased – Ending RM inventory

to put it other way, RM used = RM purchased ± change in RM inventory ………….(i)

Similarly, COGM = Beginning WIP inventory + RM used + Direct Labor + Production overhead - Beginning WIP inventory

in other way it is, COGM = RM used + Direct Labor + Production overhead ± change in WIP inventory ………….(ii)

Also, COGS = Beginning FG inventory + COGM - Ending FG inventory

Or COGS = COGM ± change in FG inventory ………….(iii)

By putting in place of COGS, the formula as mentioned in (ii) above, we get

COGS = (RM used + Direct Labor + Production overhead ± change in WIP inventory) ± change in FG inventory

Similarly, by putting in place of RM used, the formula as mentioned in (i) above, we get

COGS = (RM purchased ± change in RM inventory ) + Direct Labor + Production overhead ± change in WIP inventory ± change in FG inventory

Now summarizing it, we get

COGS = (RM purchased + Direct Labor + Production overhead) ± change in RM inventory ± change in WIP inventory ± change in FG inventory

In the sign ±, for increase it is '-' and for decrease it is '+'

So now put value in our formula,

COGS = (9,500 + 12,800 + 4,350) - (1800 - 2,150) - (3,500 - 4,200) + (7,500 - 6,100)

= 26,650 - (350) - (700) + 1,400

= 26,650 - 350 - 700 + 1,400

= 27,000