Question

On January 30, 2004, the manufacturing facility of a medium-sized company was severely damaged by an accidental fire. As a result, the company’s direct materials, work-in-process, and finished goods inventories were destroyed. The company did have access to certain incomplete accounting records, which revealed the following:

1. Beginning inventories, January 1, 2004:

DM	$ 32,000
WIP	68,000
FG	30,000

2. Key ratios for the month of January 2004:

Gross profit =	20% of sales
Prime costs =	70% of total manufacturing costs
Manufacturing overhead =	40% of conversion costs

3. Ending work-in-process is always 10% of the monthly total manufacturing costs.

4. Actual operations data for the month of January 2004:

Sales	$ 900,000
DM purchases	320,000
DL incurred	360,000

Note: In this question, RM Inventory is referred to as DM Inventory. This implies that there is no indirect materials.

Required

From the above data, reconstruct [the] statement of COGM.

Please show work and explain! thank you very much!

Answer 1

$ 68.000 Statement of Cost of Goods Manfactured WIP, January1 Direct Materials Opening Direct materials $ 32,000 Add: Direct Materials Purchases $ 3,20,000 Direct Materials avaliable $ 3,52,000 Less: Closing DM $ -1,52,000 $ 2,00,000 Direct Labour $ 3,60,000 Total manufacturing Overhead $ 2,40,000 Total manufacturing Costs Total Cost of work in Process Less:WIP, January 31 Cost of Goods Manufactured $ $ $ $ 8,00,000 8,68,000 -80,000 7,88,000

From the above data, reconstruct the Statement of COGM 1.Manfacturing Overhead MO=(0.4)(DL+MO) =[(0.4)*360000]+(0.4)*MOH =(0.6)*MOH=(0.4)*360000 MOH= 240000 2.Prime Costs =DM+DL=(0.7)*TMC =MOH=(0.3)*TMC =240000=(0.3)* TMC TMC =800000 DM =160000 Here, TMC = Total Manufacturing Cost DM=Direct material DL= Direct labor MOH= Manunfacturing overhead