Question

The Solar Clothing Company (SCC) experienced growth in the spring of 2018 as consumer interest in solar clothing soared. To accommodate increasing demand, SCC wants to develop plans for expansion. First, however, SCC needs to determine the cost of goods sold for an average sales period to calculate gross profit margin. Use the SCC cost information below to calculate the cost of goods sold for July 2018.

SCC Cost Information for July 2018

Direct Materials Inventory July 1, 2018 $1,250,000
Direct Labor $775,000
Work in Process Inventory July 31, 2018 $500,000
Finished Goods Inventory July 1, 2018 $950,000
Direct Materials Purchased $2,750,000
Factory Overhead $650,000
Direct Materials Inventory July 31, 2018 $700,000
Work in Process Inventory July 1, 2018 $525,000
Finished Goods Inventory July 31, 2018 $850,000

Answer 1

The Solar Clothing Company (SCC)

The cost of goods sold for July 2018 is:

= $4,850,000

Step-by-step explanation:

a) Data and Calculations:

Direct Materials Inventory July 1, 2018 $1,250,000

Direct Labor $775,000

Work in Process Inventory July 31, 2018 $500,000

Finished Goods Inventory July 1, 2018 $950,000

Direct Materials Purchased $2,750,000

Factory Overhead $650,000

Direct Materials Inventory July 31, 2018 $700,000

Work in Process Inventory July 1, 2018 $525,000

Finished Goods Inventory July 31, 2018 $850,000

T-accounts

Direct Materials Inventory

Date Account Titles Debit Credit

July 1, 2018 Beginning balance $1,250,000

Direct Materials Purchased $2,750,000

Work in Process $3,300,000

Direct Materials Inventory July 31, 2018 $700,000

Work in Process Inventory

Date Account Titles Debit Credit

July 1, 2018 Beginning balance $525,000

Direct materials Inventory 3,300,000

Direct Labor 775,000

Factory Overhead 650,000

Finished Goods Inventory $4,750,000

Work in Process Inventory July 31, 2018 $500,000

Finished Goods Inventory July 1, 2018

Date Account Titles Debit Credit

July 1, 2018 Beginning balance $950,000

Work in Process 4,750,000

Cost of goods sold $4,850,000

Finished Goods Inventory July 31, 2018 $850,000