Question

exercise 3-3 (algo) schedules of cost of goods manufactured and cost of goods sold lo3-3

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 Cost of Goods Manufactured

Using the Schedule of Cost of Goods Manufactured and Cost of Goods Manufactured knowledge points:

1. Direct Materials Used in Production:

$$ \text{Beginning Raw Materials Inventory} + \text{Purchases of Raw Materials} - \text{Ending Raw Materials Inventory} $$

$$ \$11,800 + \$30,000 - \$18,300 = \$23,500 $$

1. Total Manufacturing Costs Added to Production:

$$ \text{Direct Materials Used} + \text{Direct Labor} + \text{Manufacturing Overhead Applied} $$

$$ \$23,500 + \$59,700 + \$87,000 = \$170,200 $$

1. Total Manufacturing Costs to Account For:

$$ \text{Beginning Work in Process Inventory} + \text{Total Manufacturing Costs Added} $$

$$ \$55,400 + \$170,200 = \$225,600 $$

1. Cost of Goods Manufactured:

$$ \text{Total Manufacturing Costs to Account For} - \text{Ending Work in Process Inventory} $$

$$ \$225,600 - \$68,700 = \$152,360 $$

Calculate Cost of Goods Sold

Using the Schedule of Cost of Goods Sold knowledge point:

1. Unadjusted Cost of Goods Sold:

$$ \text{Beginning Finished Goods Inventory} + \text{Cost of Goods Manufactured} - \text{Ending Finished Goods Inventory} $$

$$ \$34,800 + \$152,360 - \$43,500 = \$143,660 $$

1. Adjusted Cost of Goods Sold:

Since overhead is underapplied by \(\$4,120\), this underapplied amount must be added to the unadjusted Cost of Goods Sold:

$$ \text{Adjusted COGS} = \text{Unadjusted COGS} + \text{Underapplied Overhead} $$

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

Answer:

Question 1

The Schedule of Cost of Goods Manufactured is completed as shown in the image:

• Direct materials used in production: \(\$23,500\)
• Total manufacturing costs added to production: \(\$170,200\)
• Total manufacturing costs to account for: \(\$225,600\)
• Cost of goods manufactured: \(\$152,360\)

Question 2

The Schedule of Cost of Goods Sold is prepared as follows:

Primare Corporation
Beginning finished goods inventory	\(\$34,800\)
Add: Cost of goods manufactured	\(152,360\)
Cost of goods available for sale	\(187,160\)
Less: Ending finished goods inventory	\((43,500)\)
Unadjusted cost of goods sold	\(143,660\)
Add: Underapplied overhead	\(4,120\)
Adjusted cost of goods sold	\(\$147,780\)