he following data (in thousands of dollars) have been taken from the accounting

Question

he following data (in thousands of dollars) have been taken from the accounting records of Karmana Corporation for the just-completed year.
Sales ...............................................................................................$1,500
Raw materials inventory, beginning ...............................................$20
Raw materials inventory, ending ..........................,.........................$40
Purchases of raw materials .............................................................$150
Direct labor .......................................................................................$180
Manufacturing overhead ...............................................................$250
Administrative expenses ...............................................................$100
Selling expenses .............................................................................$140
Work-in-process inventory, beginning ........................................$80
Work-in-process inventory, ending .............................................$50
Finished goods inventory, beginning ........................................$125
Finished goods inventory, ending ...............................................$60

Use these data to prepare (in thousands of dollars) a schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold for the year. In addition, elaborate on the relationship between these schedules as they relate to the flow of product costs in a manufacturing company

Explanation / Answer

Amount in thousand $ Raw Material inventory - Beginning 20 Add:- Purchases of Raw Material 150 170 Less:- Raw Material Inventory- Closing 40 Raw Material Consumption 130 Add:- Direct Labour 180 Prime Cost 310 Add:- Work in Progress inventory- beginning 80 390 Less:- Work in progress inventory- closing 50 340 Add:- Manufacturing Overhead 250 Cost of Goods Manufactured 590 Add:- Administration Overhead 100 Cost of goods produced 690 Add:- Finished goods inventory- beginning 125 815 Less:- Finished goods inventory- Closing 60 Cost of Goods Sold 755 Add:- Selling Expenses 140 Cost of Sales 895 Sales 1500 Net Profit (Sales- Cost of Sales) 605

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