Question

Cost Terminology Quiz Bearkat Corporation is a manufacturing company that uses an actual costing system and produces one type of product. On January 1st, they had the following account balances in their three inventory accounts: Finished goods Raw materials Work-in-process $47,000 42,500 44,000 During the year, Bearkat purchased $760,000 of materials on account which consists of both direct and indirect materials. They used $221,000 of direct materials and $40,000 of indirect materials. Total payroll costs were $522,400 of which $325,000 were direct, $59,000 were indirect, and the remainder were administrative payroll costs. Other costs incurred during the year were as follows: Depreciation (80% related to the factory) Rent(factory occupies 60% of the building) Utilities (70% related to the factory) $38,000 50,000 36,800 On December 31t, Bearkat had $39,500 in work-in-process and S15,500 in finished goods. The raw materials balance on December 31st is unknown. Based on this information, answer the following and place your answers in the appropriate blanks. a. What were the conversion costs and period costs for the year? Conversion Period b. What was cost of goods manufactured for the year?

Answer 1

Answer

Requirement A :

Computation of conversion cost for the year
Particulars	Amount
Direct labor	$325,000.00
Manufacturing overhead:
Indirect Materials	$40,000.00
Indirect labor	$59,000.00
Factory Depreciation ($38,000*80%)	$30,400.00
Factory Rent ($50,000 * 60%)	$30,000.00
Factory Utilities ($36,800*70%)	$25,760.00
Total Manufacturing overhead	$185,160.00
Total Conversion cost incurred	$510,160.00

Computation of Period cost for the year
Particulars	Amount
Administrative Salaries ($522,400 - $325,000 - $59,000)	$138,400.00
Depreciation ($38,000*20%)	$7,600.00
Rent ($50,000*40%)	$20,000.00
Utilities ($36,800*30%)	$11,040.00
Total Period Cost	$177,040.00

Requirement B :

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Compuatation of cost of goods manufactured - Bearkat Corporation
Particulars	Amount
Direct material	$221,000.00
Direct labor	$325,000.00
Manufacturing overhead	$185,160.00
Total manufacturing cost incurred	$731,160.00
Add: Beginning WIP	$44,000.00
Less: Ending WIP	$39,500.00
Cost of goods manufactured	$735,660.00

Requirement C :

Compuatation of cost of goods sold- Bearkat Corporation
Particulars	Amount
Beginning finished goods inventory	$47,000.00
Add: Cost of goods manufactured	$735,660.00
Less: Ending finished goods inventory	$15,500.00
Cost of goods sold	$767,160.00

Requirement D :

If bearkat incurred an operating loss of $49,300 then sales

= Cost of goods sold + Period costs - Operating loss

= $767,160 + $177,040 - $49,300

= $894,900

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