Question

The following information is available for the first year of operations of Creston Inc., a manufacturer of fabricating equipment:
Sales $12,375,000
Gross profit 5,200,000
Indirect labor 410,000
Indirect materials 180,000
Other factory overhead 810,000
Materials purchased 4,125,000
Total manufacturing costs for the period 7,880,000
Materials inventory, end of period 290,000
Using this information, determine the following amounts:

a. Cost of goods sold $
7,175,000
b. Direct materials cost $
395,000
c. Direct labor cost $

Answer 1

Answer:

a.$7,175,000

b.$3,655,000

c.$2,825,000

Explanation:

a.Calculation of Cost of Goods Sold

COGS= Sales - Gross profit

=12375000-5200000

=$7,175,000

Cost of Goods Sold for Creston Inc is $7,175,000

b. Calculation of direct materials cost

Direct Material Cost = Materials purchased - Indirect materials - Materials inventory

=4125000-180000-290000

=$3,655,000

Direct materials cost is $3,655,000

c. Calculation of direct labor cost

Direct labor cost= Total manufacturing costs for the period - Direct materials - factory overhead (Indirect labor + Indirect materials + Other factory overhead)

=7880000-3655000-1400000

=$2825000

Direct labor cost is $2,825,000