River Queen Corporation began operations early in the current year, building lux

Question

River Queen Corporation began operations early in the current year, building luxury boats. During the year, the company started and completed 40 boats at a cost of $80,000 per unit. Of these, 30 were sodl for $130,000 each and 10 remain in finished goods inventory. In addition, the company had five partially completed in its factory at year-end. Total costs for the year (summarized alphabetically) were as follows: Instructions Compute the following for the current year: Total manufacturing costs charged to work in process during the period. Cost of finished goods manufactured. Cost of goods sold. Gross profit on sales. Ending inventories of (1) work in process and (2) finished goods.

Explanation / Answer

Direct manufacturing cost charged to Work in progress = Direct material + Direct Labour

= $ 800000+ $ 1000000

= $1800000

Cost of Finished good = $ 1800000+$2000000 = $ 3800000

Cost of Good sold = $ 3800000+ $ 600000 - ( 10*$ 80000)

= $ 3600000

Gross profit = (30* $ 130000)- $ 3600000

= $ 300000

Ending inventories = WIP = $1800000*5/40 units =$ 225000

Cost of finished good = 10*$ 4400000/40 Units

= $ 1100000

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