Question

A corporation used $35,000 of direct materials and incurred $73,000 in direct labor cost, and $112,500 in manufacturing overhead costs during the period. What is the cost of goods manufactured if the beginning and ending Work-in-Process Inventories were $28,000 and $21,500, respectively?A. $248,500B. $227,000C. $214,000D. $220,500

Answer 1

Answer:

B   Cost of goods manufactured   :      $227,000.00

Explanation:

Production cost is the sum of direct material cost, direct labour cost and overhead.

Direct material costs are the costs of materials used in the production . E,g flour for making bread

Direct labour costs are the costs of all workers involved directly in the production of the goods. The wages paid for the hours spent by bakers for producing bread.

Overheads are all other costs incurred which cannot be traced directly to the product. e,g rent, accountant salaries,e.tc

Opening working in progress represents accumulated production cost incurred on goods for which production commenced in a prior period but was not concluded. These items will need to be continued in the folowing period, hence further production costs would incurred.

Closing working in progress these represents production work for which work is yet to be completed as the end of the current period.

To determine the production cost of the the products completed in a  particular period, use the formula below:

Production costs of completed units= Value of opening work in proress + Production cost incurred in the period less value of closing working progress.

So we apply this to the question

                                                           $

Direct material                         35,000.00

Direct Labour                          73,000.00

Manufacturing overhead           112,500.00

Further production cost incurred    220,500.00

Add Opening WIP                           28,000.00

Less closing WIP                              (21,500.00

Cost of goods manufactured         227,000.00