Budgeted Gross Margin Eastport Company’s Operating budgets reveal the following

Question

Budgeted Gross Margin Eastport Company’s Operating budgets reveal the following information: net sales, $400,000; beginning materials inventory, $23,000; materials purchased, $185,000; beginning work in process inventory, $64,700; beginning finished goods inventory, $21,600; direct labor costs, $34,000; overhead applied, $67,000; ending work in process inventory, $61,200; ending materials inventory, $20,000; and ending finished goods inventory, $18,000. Compute Eastport Company's budgeted gross margin.

Explanation / Answer

Raw material used in manufacturing

=Beg Raw material+ Raw material purchase- Ending Raw material

=$23,000+$185,000-$20,000

=$188,000

Cost of goods manufactured

= Beg wip + direct material used+ direct labor+ factory over head

- Ending WIP

=$64,700+$188,000+$34,000+$67,000-$61,200

=$292,500

Cost of goods sold

=Beg finished goods+ cost of goods manufactured- ending Finished goods

=$21,600+$292,500-$18,000

=$296,100

Gross profit=Net sales- Cost of goods sold

                   =$400,000-$296,100

                   =$103,900

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