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

Exercise 2

Basic Concepts

The following data refer to one year. Fill in the blanks.

Direct material inventory, January 1	a. _____
Direct material inventory, December 31	.$ 8,200
Work-in-process inventory, January 1	5,400
Work-in-process inventory, December 31	7,600
Finished goods inventory, January 1	3,800
Finished goods inventory, December 31	600
Purchases of direct materials	32,200
Cost of goods manufactured during the year	108,900
Total manufacturing costs	b. _____
Cost of goods sold	112,100
Gross margin	94,500
Direct labor	c. _____
Direct materials used	29,200
Manufacturing overhead	27,600
Sales revenue	d. _____

Step 1 of 4

We fill in the blanks by preparing the Cost of goods Manufactured and Sold statement, which is as follows:

Cost of Goods Manufactured and Sold statement

For the Year ending December, 31

Beginning work-in-process inventory, January 1		$ 5,400
Manufacturing costs during the year
Direct materials:
Beginning inventory, January 1 (a)	$ 5,200
Add: Purchases		$ 32,200
Direct materials available		$ 37,400
Less: Ending inventory, December 31	$ 8,200
Direct material used		$ 29,200
Direct labor (c)		$ 54,300
Manufacturing overhead		$ 27,600
Total manufacturing costs incurred (b)		$111,100
Total work in process during the year		$116,500
Less: Ending work-in-process, December 31		$ 7,600
Cost of goods manufactured		$108,900
Add: Beginning finished goods inventory, January 1		$ 3,800
Finished goods available for sale		$112,700
Less: Ending finished goods inventory, December 31		$ 600
Cost of goods sold			$112,100

a.

Direct material inventory on January 1

Direct material at the beginning of the year will be calculated as follows:

Direct materials used	$29,200
Add: Ending material inventory	$8,200
	$37,400
Less: Direct materials purchased	$32,200
Beginning Direct material inventory	$5,200