Question

Cost Assignment Methods Brody Company makes industrial cleaning solvents. Various chemicals, detergent, and water are mixed together and then bottled in 10-gallon drums. Brody provided the following information for last year: $250,000 140,000 45,000 30,000 50,000 15,000 20,000 18,000 34,000 Raw materials purchases Direct labor Depreciation on factory equipment Depreciation on factory building Depreciation on headquarters building Factory insurance Property taxes: Factory Headquarters Utilities for factory Utilities for sales office Administrative salaries Indirect labor salaries Sales office salaries Beginning balance, raw materials Beginning balance, work in process Beginning balance, finished goods Ending balance, raw materials Ending balance, work in process Ending balance, finished goods 1,800 150,000 156,000 90,000 124,000 124,000 84,000 102,000 130,000 82,000 Last year, Brody completed 100,000 units. Sales revenue equaled $1,200,000, and Brody paid a sales commission of 5 percent of sales. Required: 1. Calculate the direct materials used in production for last year. 2. Calculate total prime cost.

Answer options for question

4. Beginning work in process, cost of goods manufactured, direct materials, direct wages, ending work in process.

5. Beginning finished goods inventory, cost of good avaliable for sale, cost of goods manufactured, cost of goods sold, ending finished goods inventory.

6. Administrative expenses, cost of goods sold, gross margin, operating income, sales, selling expenses.

Answer 1

1
Direct material used	Beginning raw material inventory + Purchases of material - Ending raw material inventory
Direct material used	124000+250000-102000
Direct material used	$272,000
2
Prime costs	Direct material used + Direct labor costs
Prime costs	272000+140000
Prime costs	$412,000
3
Total conversion costs	Direct labor costs + Factory overhead
Direct labor costs		$140,000
Factory overhead
Depreciation on factory equipment	$45,000
Depreciation on factory building	$30,000
Factory insurance	$15,000
Property taxes factory	$20,000
Utilities for factory	$34,000
Indirect labor salaries	$156,000
Total factory overhead		$300,000
Conversion costs		$440,000
4
Cost of goods manufactured statement for last year is shown below
Brody company
Statement of cost of goods manufactured
For last year
Direct materials used	$272,000
Direct labor costs	$140,000
Factory overhead	$300,000
Total manufacturing costs	$712,000
Beginning work in process inventory	$124,000
Ending work in process inventory	$130,000
Cost of goods manufactured	$706,000
Calculation of unit product costs
Unit product costs	Total manufacturing costs/No of units produced
Unit product costs	712000/100000
Unit product costs	$7.12
5
Statement of cost of goods sold is shown below
Brody company
Statement of cost of goods sold
For last year
Beginning finished goods inventory	$84,000
Cost of goods manufactured	$706,000
Cost of goods available for sale	$790,000
Ending finished goods inventory	$82,000
Cost of goods sold	$708,000
6
Income statement is shown below
Brody company
Income statement
For last year
		Percent
Sales	$1,200,000	100.00%
Cost of goods sold	$708,000	59.00%
Gross margin	$492,000	41.00%
Less: Operating expenses
Administrative expenses	$218,000	18.17%	(50,000+18,000+150,000)
Selling expenses	$151,800	12.65%	(1800+90000)+(1,200,000*5%)
Operating income	$122,200	10.18%