Question

Question 1

On 30 June 2013 ABC Ltd showed following actual costs for the financial year just ended:

Direct material used $450 000

Direct labour 200 000

Manufacturing overhead 400 000

The company’s planned overhead rate is 150% of direct labour cost. The balances of inventory on 1 July 2012 were as follows:

Raw material $50 000

Work in process 65 000

Finished goods 71 000

Each of those inventory balances was 10% lower on 30 June 2013.

Required:

(a) Prepare a Schedule of Cost of Goods Manufactured for the financial year;

(b) Calculate the Cost of Goods Sold for the financial year.

Answer 1

Schedule of cost of goods manufactured

Direct material used	450000
Direct labor	200000
Applied manufacturing overhead	300000
Total manufacturing cost	950000
Beginning WIP	65000
Total Cost of work in process	1015000
Less: Ending WIP	-58500
Cost of goods manufactured	956500

Schedule of cost of goods sold

Beginning finished goods	71000
Cost of goods sold	956500
Cost of goods available for sale	1027500
Less: Ending Finished goods (71000*90%)	-63900
Unadjusted cost of goods sold	963600
Add: Under applied overhead (400000-300000)	100000
Adjusted cost of goods sold	1063600