Determine the missing amount for each separate situation involving work in process cost flows

A business incurs expenses when producing its revenues. Revenues minus expenses equal the business's net income, or the change in its financial circumstances from running its operations for the time period in question. Cost of sales -- or in this case cost of goods manufactured -- is a significant portion of expenses for most businesses. It is the sum of all expenses needed to acquire the products intended for sale and sold in a certain time period. The figure is not the same as the sum of all costs spent to manufacture products in the same time period, both direct labor and manufacturing overhead being examples of such costs. This is because cost of goods manufactured is not recognized until the products are sold, meaning that it does not heed the actual pace of production.

1. Find the acquisition costs other than direct labor and manufacturing overhead spent per unit of the product produced. Most businesses estimate these figures in the course of running their operations. A business must spend on direct labor, raw materials and manufacturing overhead in order to produce each unit. As an example, suppose its raw materials cost per unit is $8.

2. Find the incomplete units at the current time period’s start; the units started and completed in the current time period; and the incomplete units at the current time period’s end. For example, the business had 2,000 incomplete units at the month’s start that has 20 percent of the raw materials cost paid for; it started and completed 10,000 units during the month; and had 4,000 incomplete units at the month’s end that has 40 percent of the raw materials cost paid for.

3. Find the change in the business’s inventories during the time period in question. Change in inventories is equal to inventories at period’s end plus cost of goods manufactured minus inventories at period’s start. For example, the business had $120,000 in inventories at the month’s start, $200,000 in inventories at the month’s end and cost of goods manufactured of $120,000, meaning that it added $200,000 to its inventories during the month.

4. Calculate the portion of the manufactured inventories that went to acquisition costs other than direct labor and manufacturing overhead. For example, the business spent 0.88 or $6.4 in raw materials to complete each of the 2,000 incomplete units at month’s start$; in raw materials to start and complete each of the 10,000 units; and 0.48 or $3.2 in raw materials to start each of the 4,000 incomplete units at month’s end. In sum, the business spent $105,600 on raw materials during this month.

5. Deduct acquisition costs other than direct labor and manufacturing overhead from the change in inventories to calculate the sum of direct labor and manufacturing overhead. For example, the business spent $105,600 of the $200,000 added to inventories on raw materials, meaning that it spent $94,400 on direct labor and manufacturing overhead.

$365,300

Work-in-process, 1/1$14,000

Direct materials used: $130,000
Direct labor:120,900

Manufacturing overhead :

Depreciation on plant$64,500
Factory supplies used: 32,600
Property taxes on plant: 20,000
=Total manufacturing overhead 117,100

Total manufacturing costs: 368,000= (DM+ DL+ Total Manufacturing Overhead)

Total cost of work-in-process: 382,000= (beginning WIP + total manufacturing overhead)

Less/MINUS:
ending work-in-process: 16,700

Cost of goods manufactured:
$365,300

[$14,000 + (($130,000 + $120,900 + ($64,500 + $32,600 + $20,000)) - $16,700 = $365,300][Beg. WIP + ((DM used + DL + (Depr. on plant + Fact. sup. used + Prop. tax on plant)) - End. WIP = COGM]

FORMULA:
BEGINNING WIP +

TOTAL MANUFACTURING COSTS (aka direct labour, direct materials used, manufacturing overhead)

LESS
ENDING WIP
= COSTS OF GOODS MANUFACTURED

Transcribed Image Text:

(1) (2) (3) Direct materials used $ (a) $150,480 $33,890 Direct labor used 75,000 (d) 45,720 Factory overhead 122,000 32,840 60,275 Total manufacturing costs 243,500 238,700 (g) Work in process inventory, beginning (b) 56,920 8,245 Total cost of work in process 289,325 (e) (h) Work in process inventory, ending (c) 22,545 11,250 Cost of goods manufactured 265,420 (f) (1)

A business incurs expenses when producing its revenues. Revenues minus expenses equal the business's net income, or the change in its financial circumstances from running its operations for the time period in question. Cost of sales -- or in this case cost of goods manufactured -- is a significant portion of expenses for most businesses. It is the sum of all expenses needed to acquire the products intended for sale and sold in a certain time period. The figure is not the same as the sum of all costs spent to manufacture products in the same time period, both direct labor and manufacturing overhead being examples of such costs. This is because cost of goods manufactured is not recognized until the products are sold, meaning that it does not heed the actual pace of production.

1. Find the acquisition costs other than direct labor and manufacturing overhead spent per unit of the product produced. Most businesses estimate these figures in the course of running their operations. A business must spend on direct labor, raw materials and manufacturing overhead in order to produce each unit. As an example, suppose its raw materials cost per unit is $8.

2. Find the incomplete units at the current time period’s start; the units started and completed in the current time period; and the incomplete units at the current time period’s end. For example, the business had 2,000 incomplete units at the month’s start that has 20 percent of the raw materials cost paid for; it started and completed 10,000 units during the month; and had 4,000 incomplete units at the month’s end that has 40 percent of the raw materials cost paid for.

3. Find the change in the business’s inventories during the time period in question. Change in inventories is equal to inventories at period’s end plus cost of goods manufactured minus inventories at period’s start. For example, the business had $120,000 in inventories at the month’s start, $200,000 in inventories at the month’s end and cost of goods manufactured of $120,000, meaning that it added $200,000 to its inventories during the month.

4. Calculate the portion of the manufactured inventories that went to acquisition costs other than direct labor and manufacturing overhead. For example, the business spent 0.88 or $6.4 in raw materials to complete each of the 2,000 incomplete units at month’s start$; in raw materials to start and complete each of the 10,000 units; and 0.48 or $3.2 in raw materials to start each of the 4,000 incomplete units at month’s end. In sum, the business spent $105,600 on raw materials during this month.

5. Deduct acquisition costs other than direct labor and manufacturing overhead from the change in inventories to calculate the sum of direct labor and manufacturing overhead. For example, the business spent $105,600 of the $200,000 added to inventories on raw materials, meaning that it spent $94,400 on direct labor and manufacturing overhead.

$365,300

Work-in-process, 1/1$14,000

Direct materials used: $130,000
Direct labor:120,900

Manufacturing overhead :

Depreciation on plant$64,500
Factory supplies used: 32,600
Property taxes on plant: 20,000
=Total manufacturing overhead 117,100

Total manufacturing costs: 368,000= (DM+ DL+ Total Manufacturing Overhead)

Total cost of work-in-process: 382,000= (beginning WIP + total manufacturing overhead)

Less/MINUS:
ending work-in-process: 16,700

Cost of goods manufactured:
$365,300

[$14,000 + (($130,000 + $120,900 + ($64,500 + $32,600 + $20,000)) - $16,700 = $365,300][Beg. WIP + ((DM used + DL + (Depr. on plant + Fact. sup. used + Prop. tax on plant)) - End. WIP = COGM]

FORMULA:
BEGINNING WIP +

TOTAL MANUFACTURING COSTS (aka direct labour, direct materials used, manufacturing overhead)

LESS
ENDING WIP
= COSTS OF GOODS MANUFACTURED

Transcribed Image Text:

(1) (2) (3) Direct materials used $ (a) $150,480 $33,890 Direct labor used 75,000 (d) 45,720 Factory overhead 122,000 32,840 60,275 Total manufacturing costs 243,500 238,700 (g) Work in process inventory, beginning (b) 56,920 8,245 Total cost of work in process 289,325 (e) (h) Work in process inventory, ending (c) 22,545 11,250 Cost of goods manufactured 265,420 (f) (1)

Image transcription text

Determine the missing amount for each separate situation involving manufacturing cost flows. (1) (2) (3) Direct materials used $ 58,230 $ 151,380 34,790 Direct labor used 75,900 46,620 Factory overhead 122,900 33,740 61,175 Total manufacturing costs 244,400 239,600 Work in process inventory, beginning 57,820 9,145 Total cost of work in process 291,125 Work in process inventory, ending 23,445 12, 150 Cost of goods manufactured 266,320

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