We have covered Cost of goods manufactured topic in detail previously. Keeping in view the demand of this topic in students, we are putting together some very interesting problems and solutions. Practicing these will increase your chances of passing exams with high marks. Lets start!
Microchop Company produces a single product. The following data has been taken from the company’s accounting records:
| year | 1999: production in units | 30,000 |
| Sales in units | ? | |
| Ending finished goods in units | ? | |
| Sales (Rs.25/- per unit) | 6,50,000 | |
| Costs | ||
| Advertising | Rs.90,000 | |
| Direct labor | 1,60,000 | |
| Raw materials purchased | 80,000 | |
| Building rent (production uses 80% of the space, administration & sales office use the rest) | 50,000 | |
| Utilities, factory | 35,000 | |
| Maintenance, factory | 25,000 | |
| Depreciation on factory equipment is Estimated at Rs.0.10 per unit produce | ? | |
| Selling and administrative salaries | 1,00,000 | |
| Other factory overheads costs | 11,000 | |
| Other selling and administrative expenses | 20,000 |
| Inventories | Jan 1, 1999 | Dec 31, 1999 |
| Raw materials | Rs. 20,000 | Rs. 10,000 |
| Work in process | 30,000 | 40,000 |
| Finished goods | —- | ? |
The finished good inventory is being carried at average unit production
Required: Prepare statement of cost of goods manufactured.
Solution
| Word in process (January 1) | 30,000 | ||
| Raw Material Used | |||
| Raw Material inventory (January 1) | 20,000 | ||
| Add: Raw Material purchase | 80,000 | ||
| Raw material available for use | 100,000 | ||
| Less: Raw material inventory (December 31) | 10,000 | ||
| Raw Material used | 90,000 | ||
| Direct labor | |||
| Factory overhead | |||
| Building rent (50,000 x 80%) 40,000 | 40,000 | ||
| Utilization factory 35,000 | 35,000 | ||
| Maintenance factory 25,000 | 25,000 | ||
| Depreciation on equipment 3,000 | 3,000 | ||
| Other factory overhead 11,000 | 11,000 | ||
| Total factory overhead | 114,000 | ||
| Merchandise cost | 364,000 | ||
| Total cost of goods in process | 394,000 | ||
| Less: Work in process inventory (Dec 31) | 40,000 | ||
| Cost of goods manufactured | 354,000 |