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Analyzing Activity in Inventory Accounts Selected data concerning operations of Cascade Manufacturing Company for the past fiscal year follow: Raw materials used $600,000 Total manufacturing costs charged to production during the year(includes raw materials, direct labor, and manufacturing overheadapplied at a rate of 60 percent of direct labor costs) 1,362,000 Cost of goods available for sale 1,507,000 Selling and general expenses 60,000 Inventories Beginning Ending Raw materials $70,000 $80,000 Work-in-process 85,000 30,000 Finished goods 90,000 110,000 Determine each of the following: (a) Cost of raw materials purchased $Answer 610,000 (b) Direct labor costs charged to production $Answer 0 (c) Cost of goods manufactured $Answer 0 (d) Cost of goods sold

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Answer:

Cascade Manufacturing Company

(a) Cost of raw materials purchased $ 610,000

(b) Direct labor costs charged to production $441,875

(c) Cost of goods manufactured $1,362,000

(d) Cost of goods sold $1,342,000

Explanation:

a) Data and Calculations:

Raw materials used = $600,000

Total manufacturing costs charged to production = $1,362,000

Cost of goods available for sale = $1,507,000

Selling and general expenses = 60,000

Inventories         Beginning    Ending

Raw materials     $70,000     $80,000

Work-in-process   85,000       30,000

Finished goods    90,000       110,000

T-accounts:

Raw materials

Beginning balance     $70,000

Purchases                   610,000

Raw materials used                      $600,000    

Ending balance                                 80,000

Work-in-process

Beginning balance       85,000

Raw materials used   600,000

Direct labor cost          441,875

Overhead cost             265,125

Finished goods inventory          $1,362,000

Ending balance                                 30,000

Finished goods

Beginning balance      90,000

Work in process     1,362,000

Cost of goods sold                      1,342,000

Ending balance                               110,000

Direct labor and overhead = $1,392,000 - 685,000 = $707,000

Direct labor = 100%

Overhead cost = 60% of direct labor

Direct labor and overhead = 160% = $707,000

Direct labor = $707,000/1.6 = $441,875

Overhead cost = $265,125 ($441,875 * 60%)

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