The cost of goods sold in March 2010 for Targe Co. was $2,644,100. March 31 Work

Question

The cost of goods sold in March 2010 for Targe Co. was $2,644,100. March 31 Work in Process Inventory was 25 percent of the March 1 Work in Process Inventory. Overhead was 225 percent of direct labor cost. During March, $1,182,000 of direct material was purchased. Other March information follows: Inventories March 1 March 31 Direct Materials $30,000 $42,000 Works in Process $90,000 $ ? Finished Goods $125,000 $18,400
Prepare a schedule of the cost of goods sold for March. Prepare the March cost of goods manufactured schedule. What was the amount of prime cost incurred in March? What was the amount of conversion cost incurred inMarch?

Explanation / Answer

Direct Labor = 400,000 Start by analyzing each Inventory account for March. Beg Bal plus Additions = sub-total, less Transfers Out = End Bal Direct Matl Inventory - BB 30,000 + 1,182,000 = 1,212,000 less 42,000EB = 1,170,000 transferred to WIP Finished Goods Inv - BB 125,000; transferred to CGS 2,644,100, EB 18,400. Therefore Transfer In from WIP were 2,537,500. WIP Inventory - BB 90,000 + 1,170,000 transferred in from Direct Matl Inv less 2,537,500 transferred out to FG, with Ending Balance of 22,500 means Direct Labor and Overhead together totaled 1,300,000. Direct Labor + 225% DL = 1,300,000. Divide 1,300,000 by 3.25 (DL of 1 + 2.25DL) means DL was 400,000 and OH was 900,000.

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