Question

Cost Flow Relationships

The following information is available for the first year of operations of Creston Inc., a manufacturer of fabricating equipment:

Sales	$1,356,900
Gross profit	366,400
Indirect labor	122,100
Indirect materials	50,200
Other factory overhead	23,100
Materials purchased	692,000
Total manufacturing costs for the period	1,498,000
Materials inventory, end of period	50,200

Using the above information, determine the following amounts:

a. Cost of goods sold	$
b. Direct materials cost	$
c. Direct labor cost	$

Answer 1

Solution:

a)

Cost of good sold = sales - grossprofit

=$1,356,9000 -$366,400

Cost of good sold = $990,500

b)

Direct material cost = Material purchased - Material inventory, end of period -indirect material

=$692,000 -$50,200 -$50,200

=$591,600

c)

Direct labor cost = Manufacturing cost - Direct materials - indirect material - Indirect labor - other factory overhead

=$1,498,000 -$591,600 -$50,200 -$122,100 -$23,100

=$711,000

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