Question

Analyzing Activity in Inventory Accounts
Selected data concerning operations of Cascade Manufacturing Company for the past fiscal year follow:

Raw materials used	$600,000
Total manufacturing costs charged to production during the year(includes raw materials, direct labor, and manufacturing overheadapplied at a rate of 60 percent of direct labor costs)	1,362,000
Cost of goods available for sale	1,507,000
Selling and general expenses	60,000

	Inventories
	Beginning	Ending
Raw materials	$70,000	$80,000
Work-in-process	85,000	30,000
Finished goods	90,000	110,000

Determine each of the following:

(a) Cost of raw materials purchased
$Answer

(b) Direct labor costs charged to production
$Answer

(c) Cost of goods manufactured
$Answer

(d) Cost of goods sold
$Answer

Answer 1

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a.	Cost of raw material purchased:
	Ending raw material	=	$        80,000
Add:	Raw material used	=	$     6,00,000
Less:	Beginning raw material	=	$        70,000
	Cost of raw material purchased	=	$     6,10,000
b.	Direct labor costs charged to production:
	Total manufacturing cost	=	1362000
Less:	Raw material used	=	$     6,00,000
	Direct labor + Manufacturing overhead	=	$     7,62,000
Less:	Manufacturing overhead [($762000/160%) X 60%]	=	$     2,85,750
	Direct labor costs charged to production	=	$     4,76,250
c.	Cost of goods Manufactured:
	Total manufacturing cost	=	$ 13,62,000
Add:	Beginning work in process inventory	=	$        85,000
Less:	Ending work in process inventory	=	$        30,000
	Cost of goods manufactured	=	$ 14,17,000
d.	Cost of Goods Sold:
	Finished Goods Inventory Beginning	=	$        90,000
Add:	Cost of goods manufactured	=	$ 14,17,000
Less:	Finished Goods Inventory Ending	=	$     1,10,000
	Cost of goods sold	=	$ 13,97,000