Question

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

Answer 1

The cost of raw materials purchased was $610,000. Direct labor costs charged to production were $476,250. The cost of goods manufactured was $1,417,000, and the cost of goods sold was $1,397,000.

Step-by-step explanation:

The question relates to the analysis of inventory accounts and the calculation of various cost elements for Cascade Manufacturing Company. When evaluating the details provided, the following calculations are made:

(a) Cost of raw materials purchased is calculated as the sum of the raw materials used plus the ending inventory of raw materials minus the beginning inventory. This equals $610,000 ($600,000 + $80,000 - $70,000).

(b) Direct labor costs can be derived from the total manufacturing costs. Given that manufacturing overhead is applied at a rate of 60 percent of direct labor costs, we can set up an equation where direct labor costs (DLC) plus raw materials ($600,000) plus 60% of DLC equals the total manufacturing costs ($1,362,000). Solving for DLC, we find that the direct labor costs charged to production are $476,250.

(c) Cost of goods manufactured (COGM) is calculated by adding the total manufacturing costs to the beginning work-in-process and then subtracting the ending work-in-process. COGM = $1,362,000 + $85,000 - $30,000, resulting in $1,417,000.

(d) Cost of goods sold (COGS) is determined by adding the cost of goods manufactured to the beginning inventory of finished goods and then subtracting the ending inventory of finished goods. COGS = $1,417,000 + $90,000 - $110,000, which equals $1,397,000.

Answer 2

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

Step-by-step 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%)