Question

Mustafa Manufacturing Company began operations on January 1. During the year, it started and completed 3,000 units of product. The financial statements are prepared in accordance with GAAP. The company incurred the following costs: Raw materials purchased and used—$6,200. Wages of production workers—$7,400. Salaries of administrative and sales personnel—$3,000. Depreciation on manufacturing equipment—$4,400. Depreciation on administrative equipment—$2,200.
Mustafa sold 2,400 units of product. Required Determine the total product cost for the year. Determine the total cost of the ending inventory. Determine the total of cost of goods sold.

a) TOTAL PRODUCT COST?
b) TOTAL COST OF ENDING INVENTORY?
c) TOTAL COST OF GOODS SOLD?

Answer 1

Answer:

a. $18,000

b. $3,600

c. $14,400

Explanation:

The calculations are shown below:

a. Total product cost

= Raw materials purchased and used +  Wages of production workers + Depreciation on manufacturing equipment

= $6,200 + $7,400 + $4,400

= $18,000

b. The total cost of the ending inventory would be

= (Total product cost) ÷ (Started and completed units) × remaining units

= ($18,000) ÷ (3,000 units) × 600  units

= $3,600

The remaining units would be

= 3,000 units - 2,400 units

= 600 units

c. The total of cost of goods sold would be

= (Total product cost) ÷ (Started and completed units) ×  units sold

= ($18,000) ÷ (3,000 units) × 2,400  units

= $14,400