Valenko Company provided the following account balances for the year ended Decem
ID: 2350815 • Letter: V
Question
Valenko Company provided the following account balances for the year ended December 31 (all raw materials are used in production as direct materials):
The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $720,000; the unadjusted cost of goods sold totaled $661,000; and the net operating income was $38,000. The company
Selling expenses $ 215,000 Purchases of raw materials $ 270,000 Direct labor ? Administrative expenses $ 159,000 Manufacturing overhead applied to work in process $ 339,000 Total actual manufacturing overhead costs $ 355,000Explanation / Answer
Raw Materials used in production + Direct Labor + Total Overhead Costs = Tota manufacturing costs therefore: $675,000 (total manufacturing costs) - $340,000 (total overhead costs) - $270,000) (total raw materials used in production) = $65,000. **
To calculate Beginning Work In Progress Inventory:
Manufacturing Total costs + Beginning WIP Inventory - Ending WIP Inventory =
Cost of Goods Manufactured Therefore: $690,000 (Cost of Goods Manufactured) + $33,000 (Ending WIP) - $675,000 (Total Manufacturing Costs) = $48,000.
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Now, lets look at how to complete the Cost of Goods Sold section:
Beginning Finished Goods inventory Add: Cost of Goods Manufactured Goods Available for Sale Less: Ending Finished Goods Inventory Cost of Goods Sold $30,000 690,000 $720,000 85,000 $635,000 given *** given To determine the Ending Finished
Goods Inventory: Beginning F/G Inventory + Cost of Goods Manufactured - X (which represents Ending F/G Inventory) = COGS.
OR Goods Available for Sale - X (which represents Ending F/G Inventory) = COGS Therefore: $30,000 (Beginning F/G Inventory) + $690,000 (Cost of Goods Manufactured) - X (Ending F/G) = $635,000 $720,000 - X = $635,000 $720,000 - $635,000 = X $85,000 = X 2.
Assume that the dollar amounts given above are for the equivalent of 30,000 units produced during the year. Compute the average cost per unit for direct materials used, and compute the average cost per unit for rent on the factory building. Direct materials: $270,000/ 30,000 units = $9.00 per unit.
Rent, factory building: $90,000 30,000 units = $3.00 per unit.
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3. Assume that in the following year the company expects to produce 50,000 units. What average cost per unit and total cost would you expect to be incurred for direct materials? For rent on the factory building? (Assume that direct materials is a variable cost and that rent is a fixed cost.
Direct materials: Per unit: $9.00 (unchanged)
Total: 50,000 units $9.00 per unit = $450,000.
Rent, factory building: Per unit: $90,000 50,000 units = $1.80 per unit.
Total: $90,000 (unchanged).
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