Question

Bodin Company manufactures finger splints for kids who get tendonitis from playing video games. The firm had the following inventories at the beginning and end of the month of January. January 1 January 31 Finished goods $ 125,000 $ 117,000 Work in process 235,000 251,000 Raw material 133,000 124,000 The following additional data pertain to January operations. Raw material purchased $ 191,000 Direct labor 400,000 Actual manufacturing overhead 170,000 Actual selling and administrative expenses 120,000 The company applies manufacturing overhead at the rate of 60 percent of direct-labor cost. Any overapplied or underapplied manufacturing overhead is accumulated until the end of the year.

Required:

1. Compute the company’s prime cost for January.

Prime Cost:

2. Compute the total manufacturing cost for January.

Total Manufacturing Cost:

3. Compute the cost of goods manufactured for January.

COGM:

4. Compute the cost of goods sold for January.

COGS:

5. Compute the balance in the manufacturing overhead account on January 31. Debit or credit?

Manufacturing overhead account balance on January 31 is ___________ and is ____________. (Debit or Credit)

Answer 1

Solution 1:

Prime Cost = Direct materials Used + Direct labor cost

= (133000+191000-124000) + 400000

= 200000 + 400000

= $600,000

Solution 2:

total manufacturing cost for January = Direct materials Used + Direct labor cost + manufacturing overhead applied

= 200000 + 400000 + (400000*60%) = $840,000

Solution 3:

cost of goods manufactured =  total manufacturing cost for January + beginning WIP - Ending WIP

= $840000 + $235000 - $251000 = $824,000

Solution 4:

Cost of goods sold = cost of goods manufactured + beginning Finished goods - Ending Finished goods

= $824000 + $125000 - $117000 = $832,000

Solution 5:

manufacturing overhead account on january 31 = Applied Overhead - Actual overhead

= (400000*60%) - $170000 = $70,000 Credit balance

Manufacturing overhead account balance on January 31 is "$70,000" and is "Credit".