Crunchem Cereal Company incurred the following actual costs during 20x1. Direct

Question

Crunchem Cereal Company incurred the following actual costs during 20x1. Direct material used $ 290,000 Direct labor 140,000 Manufacturing overhead 294,000 The firm’s predetermined overhead rate is 210 percent of direct-labor cost. The January 1 inventory balances were as follows: Raw material $ 31,000 Work in process 39,000 Finished goods 41,000 Each of these inventory balances was 10 percent higher at the end of the year.

1. Prepare a schedule of cost of goods manufactured for 20x1.

2. What was the cost of goods sold for the year?

Explanation / Answer

1. Schedule of Cost Of Goods Manufactured

*Closing Raw material inventory = Opening inventory x 110% = $31,000 x 110% = $34,100

**Raw material purchases = Raw material used + Clos. inventory - Open. inventory

= $290,000 + $34,100 - $31,000

= $293,100

***Closing Work in Process = Opening Work In process x 110% = $39,000 x 110% = $42,900

2. Calculation of Cost of Goods Sold

Cost Of Goods Sold (COGS) = Opening Finished goods + COGM - Closing Fnished goods

= $41,000 + $720,100 - ($41,000 x 110%)

= $761,100 - $45,100

= $716,000

Crunchem Cereal Company Schedule of Cost of Goods Manufactured For The Year 20x1 Direct material Opening raw material, Jan 1 $31,000 Raw material purchases $293,100** Raw material available for use $324,100 Less: Closing inventory $34,100* Direct material used or consumed $290,000 Direct labor $140,000 Manufacturing overhead $294,000 Total Manufacturing cost $724,000 ADD: Opening Work in process, Jan 1 $39,000 $763,000 LESS: Closing Work in process $42,900*** Cost Of Goods Manufactured (COGM) $720,100

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