Question

The information below relates to Carnes Company's operations for a recent month:

Purchases of direct materials $91,000
Direct labor cost $122,000
Selling costs (total) $42,000
Administrative costs (total) $56,000
Manufacturing overhead costs (total) $340,000
Direct materials inventory, beginning $22,000
Work in process inventory, beginning $27,000
Finished goods inventory, beginning $42,000
Direct materials inventory, ending $7,000
Work in process inventory, ending $35,000
Finished goods inventory, ending $15,000
What was Derby's cost of goods manufactured for the month?
Group of answer choices
a.$568,000
b.$545,000
c.$587,000
d.$560,000

Answer 1

Carnes Company's cost of goods manufactured for the month is calculated by adding direct materials used, direct labor cost, and manufacturing overhead costs, then adjusting for the changes in work in process inventory. The final cost is $560,000.

Step-by-step explanation:

To calculate Carnes Company's cost of goods manufactured for the month, we must account for the total manufacturing costs, which include the direct materials used, direct labor, and manufacturing overhead costs. Additionally, we adjust for changes in inventory levels of both direct materials and work in process.

We start with the total purchases of direct materials and adjust for the change in direct materials inventory to find the direct materials used:

• Purchases of direct materials: $91,000
• + Beginning direct materials inventory: $22,000
• – Ending direct materials inventory: $7,000
• Direct materials used = $106,000

Next, we add the direct labor cost and manufacturing overhead costs to the direct materials used:

• + Direct labor cost: $122,000
• + Manufacturing overhead costs: $340,000
• Total manufacturing costs = $568,000

Now we need to adjust for the changes in work in process inventory:

• Beginning work in process inventory: $27,000
• – Ending work in process inventory: $35,000
• Adjustment for work in process = $-8,000

Cost of goods manufactured is calculated by adding total manufacturing costs to the beginning work in process inventory and subtracting the ending work in process inventory:

• Total manufacturing costs: $568,000
• + Beginning work in process inventory: $27,000
• – Ending work in process inventory: $35,000
• Cost of goods manufactured = $560,000

Therefore, the cost of goods manufactured for Carnes Company for the month is $560,000 (Option d).