Primare Corporation provided the following data for last month’s manufacturing operations. Purchases of raw materials $ 30,000 Indirect materials used in production $ 4,840 Direct labor $ 58,700 Manufacturing overhead applied to work in process $ 88,000 Underapplied overhead $ 4,160 Inventories Beginning Ending Raw materials $ 10,700 $ 19,700 Work in process $ 54,400 $ 69,800 Finished goods $ 34,800 $ 43,500 Required: Prepare a schedule of cost of goods manufactured. Prepare a schedule of cost of goods sold. Assume the underapplied or overapplied overhead is closed to Cost of Goods Sold.
Question
Primare Corporation provided the following data for last month’s manufacturing operations.
Purchases of raw materials 4,840 Direct labor 88,000 Underapplied overhead 10,700 54,400 34,800 $ 43,500 Required: Prepare a schedule of cost of goods manufactured. Prepare a schedule of cost of goods sold. Assume the underapplied or overapplied overhead is closed to Cost of Goods Sold.
Solution
To prepare a schedule of cost of goods manufactured and a schedule of cost of goods sold, we need to follow these steps:
Step 1: Calculate the total raw materials used This is done by adding the beginning raw materials inventory to the purchases of raw materials, then subtracting the ending raw materials inventory.
Total Raw Materials Used = Beginning Raw Materials Inventory + Purchases of Raw Materials - Ending Raw Materials Inventory Total Raw Materials Used = 30,000 - 21,000
Step 2: Calculate the total manufacturing costs This is done by adding the total raw materials used, direct labor, and manufacturing overhead applied to work in process.
Total Manufacturing Costs = Total Raw Materials Used + Direct Labor + Manufacturing Overhead Total Manufacturing Costs = 58,700 + 167,700
Step 3: Calculate the cost of goods manufactured This is done by adding the total manufacturing costs to the beginning work in process inventory, then subtracting the ending work in process inventory.
Cost of Goods Manufactured = Total Manufacturing Costs + Beginning Work in Process Inventory - Ending Work in Process Inventory Cost of Goods Manufactured = 54,400 - 152,300
Step 4: Calculate the cost of goods sold This is done by adding the cost of goods manufactured to the beginning finished goods inventory, then subtracting the ending finished goods inventory. If there is underapplied or overapplied overhead, it is closed to the cost of goods sold.
Cost of Goods Sold = Cost of Goods Manufactured + Beginning Finished Goods Inventory - Ending Finished Goods Inventory + Underapplied Overhead Cost of Goods Sold = 34,800 - 4,160 = $147,760
So, the cost of goods manufactured is 147,760.
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