Answer:
Part 1. Compute the company’s prime cost for January
Prime cost = Direct Materials + Direct Labor
Prime Cost =
Direct Material 200,000
Add Direct Labor 400,000
Prime Cost 600,000
Therefore Prime Cost is $600,000
Part 2. Compute the total manufacturing cost for January.
Total manufacturing cost = Prime Cost + Manufacturing Overheads
Prime Cost 600,000
Add Manufacturing Overheads 240,000
Total manufacturing cost 840,000
Therefore total manufacturing cost is $840,000
Part 3. Compute the cost of goods manufactured for January
Cost of goods manufactured = Total Manufacturing Cost + Opening Work in Progress - Closing Work in Progress
Total Manufacturing Cost 840,000
Add Opening Work in Progress 235,000
Less Closing Work in Progress 251,000
Cost of goods manufactured 824,000
Therefore Cost of goods manufactured is $824,000
Part 4. Compute the cost of goods sold for January.
cost of goods sold = Opening Stock of Finished Goods + Cost of Goods Manufactured - Closing Stock of Finished Goods
Opening Stock of Finished Goods 125,000
Add Cost of Goods Manufactured 824,000
Less Closing Stock of Finished Goods 117,000
Cost of goods sold 832,000
Therefore Cost of goods sold is $832,000
Part 5. Compute the balance in the manufacturing overhead account on January 31
Open The Manufacturing Overhead Account as Follows
Debits :
Actual Manufacturing Overhead 170,000
Balancing Figure (Over-applied) 70,000
Credits:
Applied Manufacturing Overheads 240,000
Therefore Manufacturing overhead account balance on January 31 is $ 70,000 and is a Debit
Explanation:
Part 1. Compute the company’s prime cost for January
Calculation of Raw Materials Consumed In Production
Opening Stock of Raw Materials 133,000
Add Raw Materials Purchased 191,000
Less Closing Stock of Raw Materials 124,000
Raw Materials Consumed in Production 200,000
Part 2. Compute the total manufacturing cost for January.
Calculation of Manufacturing Overheads
We use the applied overheads instead of actual overheads to calculate total manufacturing costs.
Note that the company applies manufacturing overhead at the rate of 60 percent of direct-labor cost.
Therefore Manufacturing Overheads = $400,000×60%
= $240,000
