Question

Accounts receivable $27,000 $33,000 Materials inventory 22,500 6,000 Work in process inventory 70,200 48,000 Finished goods inventory 3,000 15,000 Collections on account were $625,000. Cost of goods sold was 68% of sales. Direct materials purchased amounted to $90,000. Factory overhead was 300% of the cost of direct labor. a. Compute sales revenue (all sales were on account). $ b. Compute cost of goods sold. $ c. Compute cost of goods manufactured. $ d. Compute direct materials used. $ e. Compute direct labor incurred. $ f. Compute factory overhead incurred. $

Answer 1

Answer:

A. Calculate sales revenue as follows:

Sales Revenue =  (Closing Account Receivable) + (Collection Dining the year) - (Opening  Account Receivable)

Sales Revenue = $33,000 + $625,000 - $27,000

Sales Revenue = $631,000

Hence, sales revenue is $631,000.

B.  Calculate cost of goods sold as follows:

Cost of Goods Sold = 68% of Sales

Cost of Goods Sold = 68% of $631,000

Cost of Goods Sold = $429,080

Hence, cost of goods sold is $429,080.

C. Compute cost of goods manufactured as follows:

Cost of goods manufactured = (Cost of good sold) + (Closing Finished goods) - (Opening  Finished goods)

Cost of goods manufactured = $429,080 + $15,000 - $3,000

Cost of goods manufactured = $441,080

Hence, cost of goods manufactured is $441,080.

D. Calculate direct material used as follows:

Direct material used = Opening Material + Material Purchased - Closing material

Direct material used = $22,500 + $90,000 - $6,000

Direct material used = $106,500

Hence, direct material used is $106,500.

E. Calculate direct labour incurred as follows:

Step 1:

Total Manufactured Cost = Cost of Goods Manufactured + Closing WIP - Opening WIP

Total Manufactured Cost = $441,080+$48,000-$70,200

Total Manufactured Cost = $418,880

Step 2:

(Direct labor incurred) = (Total manufacturing Cost) - [(Direct Material Incurred) +  (Factory overhead)]

Direct labor incurred = $418,880 - $106,500 - (300% of direct labor incurred)

(Direct labor incurred =100% of direct labor incurred+300% of direct labor incurred=$312,380 400% of direct labor incurred=$312,380

Direct labor incurred = $312,380/400 ×100

Direct labor incurred = $78,095

Hence, direct labour incurred is $78,095.

F. Calculate factory overhead incurred as follows:

Factory overhead incurred = 300% of Direct labour incurred

Factory overhead incurred=300%.$78,095

Factory overhead incurred= $234,285

Hence, factory overhead incurred is $234,285.