Question

Conrad, Inc. recently lost a portion of its records in an office fire. The following information was salvaged from the accounting records. Cost of Goods Sold $ 71,000 Work-in-Process Inventory, Beginning 12,900 Work-in-Process Inventory, Ending 10,200 Selling and Administrative Expense 18,000 Finished Goods Inventory, Ending 18,300 Finished Goods Inventory, Beginning ? Direct Materials Used ? Factory Overhead Applied 13,200 Operating Income 14,660 Direct Materials Inventory, Beginning 11,540 Direct Materials Inventory, Ending 6,420 Cost of Goods Manufactured 65,640 Direct labor cost incurred during the period amounted to 1.5 times the factory overhead. The CFO of Conrad, Inc. has asked you to recalculate the following accounts and to report to him by the end of the day. What is the amount in the finished goods inventory at the beginning of the year?

Answer 1

Cost of goods sold = Opening finished goods inventory + Cost of goods manufactured - closing finished goods inventory

71000 = opening finished goods inventory + 65640 - 18300

opening finished goods inventory = 23,660

Direct labour = 1.5 * factory overhead = 1.5 * 13200 = 19,800

further,

cost of goods manufactured = (opening direct material + direct material cost - closing direct material) + direct labour + manufacturing overhead + opening inventory of WIP - closing inventory of WIP

65640 = (11540 + direct material cost - 6420) + 19800 + 13200 + 12900 - 10200

direct material cost = 24,820