For work done during June,Prints Company incurred direct materials costs of $150,000 and conversion costs of $225,000.The company employs a traditional operating philosophy.At the end of August,it was determined that the Work in Process Inventory account had been assigned $2,000 of costs,and the ending balance of the Finished Goods Inventory account was $5,000.There were no beginning inventory balances.
-Using the information provided for Prints Company,how much was cost of goods manufactured during June?
A)$375,000
B)$373,000
C)$370,000
D)$377,000

Question

For work done during June,Prints Company incurred direct materials costs of $150,000 and conversion costs of $225,000.The company employs a traditional operating philosophy.At the end of August,it was determined that the Work in Process Inventory account had been assigned $2,000 of costs,and the ending balance of the Finished Goods Inventory account was $5,000.There were no beginning inventory balances. 
-Using the information provided for Prints Company,how much was cost of goods manufactured during June?
A)$375,000
B)$373,000
C)$370,000
D)$377,000

Quizplus · Accepted Answer

The formula for computing the cost of goods manufactured is:

Beginning Work in Process Inventory + Total manufacturing costs - Ending Work in Process Inventory = Cost of Goods Manufactured

Since there are no beginning inventory balances, we can omit the first part of the equation.

Total manufacturing costs is the sum of direct materials and conversion costs, or:

Total manufacturing costs = Direct Materials + Conversion Costs
Total manufacturing costs = $150,000 + $225,000
Total manufacturing costs = $375,000

Substituting everything into the equation:

$2,000 + $375,000 - Ending Work in Process Inventory = $5,000
$373,000 = Ending Work in Process Inventory

Therefore, the cost of goods manufactured during June was $373,000 (choice B).

For Work Done During June,Prints Company Incurred Direct Materials Costs