Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 22

Find the Unknown Information

After a computer failure, you are trying to reconstruct some financial results for the year just ended. While you know that backups are available, it will take too long to get the information you want. You have been able to collect the following information:

Direct materials inventory, January 1 (Beginning)	$ 16,000
Direct materials inventory, December 31 (Ending)	12,000
Work-in-process inventory, January 1 (Beginning)	21,200
Work-in-process inventory, December 31 (Ending)	10,000
Finished goods inventory, December 31 (Ending)	14,080
Purchases of direct materials	38,400
Cost of goods manufactured during this year	88,800
Total manufacturing costs	77,600
Cost of goods sold	87,040
Gross margin	52,480
Direct labor	12,160
Manufacturing overhead	23,040
Average selling price per unit	8

Required

Find the following:

a. Finished goods inventory, January 1.

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b. Direct materials used for the year.

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c. Gross margin percentage (as a percentage of sales).

Step 1 of 5

Prepare the cost of goods manufactured and sold statement before computing the required data.

Cost of goods manufactured and sold statement

Beginning work-in-process inventory, January 1		$21,200
Manufacturing costs during the year
Direct materials:
Beginning inventory, January 1		$16,000
Add: Purchases		$38,400
Direct materials available		$54,400
Less: Ending inventory, December 31		$12,000
Direct material used		$42,400
Direct labor		$12,160
Manufacturing overhead		$23,040
Total manufacturing costs incurred			$77,600
Total work in process during the year			$98,800
Less: Ending work-in-process, December 31		$10,000
Cost of goods manufactured			$88,800
Add: Beginning finished goods inventory, January 1		$12,320
Finished goods available for sale			$101,120
Less: Ending finished goods inventory, December 31		$14,080
Cost of goods sold			$87,040