Kido Construction builds and sells cheap cardboard homes. The entire home is bui

Question

Kido Construction builds and sells cheap cardboard homes. The entire home is built out of a large, single piece of cardboard with only indirect materials such as tape and nails used in construction. The price of the raw material (cardboard) used in the homes has remained perfectly stable and Kido Construction incurs no spoilage. Each home sells for $25,000. The following data is from the year ending December, 31, 2010. Because Kido Construction’s CEO has never taken an accounting class, he has asked you to take the following information and organize it into a useful format. [Assume that beginning WIP inventory has the same per- unit value as ending WIP inventory.] Item Amount Beginning raw material (1000 cardboard) $500,000 Ending raw material (500 cardboard) $250,000 Raw materials transferred into production (800 cardboard) $400,000 Ending work-in-process (500 homes) $500,000 Work-in-process transferred into finished goods (400 homes) ? Beginning finished goods (600 homes) $300,000 Homes sold (700) Direct Labor $600,000 Factory Overhead (total) $300,000 Selling, general, and administrative costs (total) $750,000 Required:

1a) What amount (in units) of raw materials was purchased?

Explanation / Answer

Ending inventory minus beginning inventory plus transferred: 500 - 1000 + 800 = 300 purchased

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