Question

Shoe Company makes loafers. During the most recent​ year, Perfect Fit incurred total manufacturing costs of $ 26 comma 100 comma 000. Of this​ amount, $ 2 comma 000 comma 000 was direct materials used and $ 19 comma 800 comma 000 was direct labor. Beginning balances for the year were Direct​ Materials, $ 700 comma 000​; ​Work-in-Process Inventory, $ 1 comma 200 comma 000​; and Finished Goods​ Inventory, $ 500 comma 000. At the end of the​ year, balances were Direct​ Materials, $ 900 comma 000​; ​Work-in-Process Inventory, $ 1 comma 900 comma 000​; and Finished Goods​ Inventory, $ 420 comma 000. Requirements
Analyze the inventory accounts to​ determine:

1. Cost of raw materials purchased during the year.

2. Cost of goods manufactured for the year.

3. Cost of goods sold for the year.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Total manufacturing costs= $26,100,000

Direct material= $2,000,000 used

Direct labor= $19,800,000

Beginning Direct​ Materials= $700,000

Begining ​Work-in-Process Inventory= $1,200,000

Beginning Finished Goods​ Inventory= $500,000.

Ending Direct​ Materials= $900,000

Ending ​Work-in-Process Inventory= $1,900,000

Ending Finished Goods​ Inventory= $420,000.

First, we need to calculate the cost of raw material purchased using the following formula:

Direct material used= beginning DM + purchases - ending DM

2,000,000= 700,000 + purchases - 900,000

400,000= purchases

Now, we can calculate the cost of goods manufactured using the following formula:

cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP

cost of goods manufactured= 1,200,000 + 26,100,000 - 1,900,000

cost of goods manufactured= 25,400,000

With this information we are in conditions to calculate the cost of goods sold:

COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory

COGS= 500,000 + 25,400,000 - 420,000= 25,480,000