Case Study 1 - (Elizabeth Hurtado)

Given Information: Material Purshased Direct Labor Sales Gross Margin Cost of Goods Avail. for Sale Prime Costs Mfg. Overhead Direct Materials Beginning Balances: Raw Material Work in Progress Finish Goods Also known by computing : $325,000 $220,000 $1,350,000 30% $1,020,000 $545,000 65% of Conversion Cost $325,000 $41,000 $56,000 $35,000

Conversion Cost = Manufacturing Overhead + Direct Labor Mfg. Overhead=65% of convertion Direct Labor = $220,000 Direct = 35% of convertion costs (100% - 65% = 35%) So, 220,000 = 35% convertion cost 220,000/.35 = Conversion Cost

So, Conversion Cost Direct Labor Mfg. Overhead

Prime Cost = direct Cost + Direct labor Costs 545,000 = direct material + 220,000

$628,571 $220,000 $408,571

Direct materials Cost =

$325,000

Calculating Gross Margin Sales Cost of Goods Sold: Beginning Finished Goods Inventory Add: Cost of Goods Manufactured Cost of Goods Available for Sale Deduct: Ending Finished Goods Inventory Gross Margin
*(Gross Margin= 30%($1,350,000))

$1,350,000 $35,000 $985,000 $1,020,000 $75,000 $945,000 $405,000

Cost of Goods Sold Beginning balance finished goods Add: Cost of goods manufactured Goods available for sale

$35,000 $985,000 $1,020,000

Less: Ending balance, finished goods Cost of goods sold Total manufacturing cost Direct materials Direct labor Manufacturing overhead Total manufacturing cost Cost of Goods Manufactured Beginning balance works in progress Total manufacturing cost Less:Ending balance work in progress Cost of good manufactured Cost of Goods Manufactured Direct Materials Beginning Raw Materials inventory Add: Purchases of Raw Materials Raw Materials Available for Use Deduct: Ending Raw Materials Inventory Raw Materials Used in Production Direct Labor Manufacturing Overhead Total Manufacturing Cost Add: Beginning Work in Progress Inventory Deduct: Ending Work in Progress Inventory Cost of Goods Manufactured

$945,000 $75,000

$325,000 $220,000 $408,471 $953,471

$56,000 $953,471 $24,471 $985,000

$41,000 $325,000 $366,000 $41,000 $325,000 $220,000 $408,471 $953,471 $56,000 $24,471 $985,000

Answers
Raw Materials Cost (purchased) Work in Progress Finished Goods Inventory

$325,000 $24,471 $75,000