Question

primare corporation provided the following data for last months manufacturing operations.

purchases of raw materials: $ 30,000
indirect materials used in production: $ 4,540
direct labor: $ 59,700
manufacturing overhead applied to work in process: $ 87,000
underapplied overhead: $ 4,120

inventories:
raw materials: beginning $ 11,800, ending $ 18,300
work in process: beginning $ 55,400, ending $ 68,700
finished goods: beginning $ 34,800, ending $ 43,500

required:

1. prepare a schedule of cost of goods manufactured.
2. prepare a schedule of cost of goods sold. assume the underapplied or overapplied overhead is closed to cost of goods sold.

Explanation:

Calculate direct materials used in production

To find the direct materials used in production, we start with the beginning raw materials inventory, add purchases of raw materials to find the total raw materials available, and then subtract the ending raw materials inventory to find the total raw materials used in production. Finally, we subtract indirect materials used in production to isolate the direct materials.

Using the Cost of Goods Sold Calculation knowledge point:

• Beginning raw materials inventory: \(\$11,800\)
• Add: Purchases of raw materials: \(\$30,000\)
• Total raw materials available: \(\$11,800 + \$30,000 = \$41,800\)
• Deduct: Ending raw materials inventory: \(\$18,300\)
• Raw materials used in production: \(\$41,800 - \$18,300 = \$23,500\)
• Deduct: Indirect materials used in production: \(\$4,540\)
• Direct materials used in production: \(\$23,500 - \$4,540 = \$18,960\)

Calculate total manufacturing costs added to production

Total manufacturing costs added to production consist of direct materials, direct labor, and manufacturing overhead applied to work in process.

• Direct materials used in production: \(\$18,960\)
• Direct labor: \(\$59,700\)
• Manufacturing overhead applied to work in process: \(\$87,000\)
• Total manufacturing costs added to production:

$$\$18,960 + \$59,700 + \$87,000 = \$165,660$$

Calculate cost of goods manufactured

To find the cost of goods manufactured, we add the beginning work in process inventory to the total manufacturing costs added to production to get the total manufacturing costs to account for, and then subtract the ending work in process inventory.

• Beginning work in process inventory: \(\$55,400\)
• Total manufacturing costs to account for: \(\$165,660 + \$55,400 = \$221,060\)
• Deduct: Ending work in process inventory: \(\$68,700\)
• Cost of goods manufactured:

$$\$221,060 - \$68,700 = \$152,360$$

Calculate cost of goods sold

To find the cost of goods sold, we start with the beginning finished goods inventory, add the cost of goods manufactured to find the cost of goods available for sale, and then subtract the ending finished goods inventory to find the unadjusted cost of goods sold. Finally, we adjust for the underapplied overhead by adding it.

• Beginning finished goods inventory: \(\$34,800\)
• Add: Cost of goods manufactured: \(\$152,360\)
• Cost of goods available for sale: \(\$34,800 + \$152,360 = \$187,160\)
• Deduct: Ending finished goods inventory: \(\$43,500\)
• Unadjusted cost of goods sold: \(\$187,160 - \$43,500 = \$143,660\)
• Add: Underapplied overhead: \(\$4,120\)
• Adjusted cost of goods sold:

$$\$143,660 + \$4,120 = \$147,780$$

Answer:

Question 1

Primare Corporation
Schedule of Cost of Goods Manufactured

Direct materials:
Add: Purchases of raw materials		30,000
Total raw materials available		41,800
Deduct: Ending raw materials inventory		18,300
Raw materials used in production	\$23,500
Deduct: Indirect materials used in production	4,540
Direct materials used in production		\$18,960
Direct labor		59,700
Manufacturing overhead applied to work in process		87,000
Total manufacturing costs added to production		165,660
Add: Beginning work in process inventory		55,400
Total manufacturing costs to account for		221,060
Deduct: Ending work in process inventory		68,700
Cost of goods manufactured		\$152,360

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Question 2

Primare Corporation
Schedule of Cost of Goods Sold

Beginning finished goods inventory	\$34,800
Cost of goods available for sale	187,160
Deduct: Ending finished goods inventory	43,500
Unadjusted cost of goods sold	143,660
Add: Underapplied overhead	4,120
Adjusted cost of goods sold	\$147,780