Chapter 16, Problem 5BP

a. 1.

To determine

Ascertain the purchase cost of direct materials during the current year.

Explanation of Solution

Direct material: Direct material cost is the cost of material that is directly involved in the production.

Ascertain the purchase cost of direct materials during the current year as follows:

Purchase of direct materials is debited to the materials inventory account, and at the time of production, the direct material costs are transferred from the material inventory account to the work in process inventory account.

Therefore, the purchase cost of direct materials during the current year is $255,000.

a. 2

To determine

Ascertain the cost of direct material used during the year.

Explanation of Solution

Ascertain the cost of direct material used during the year as follows:

Particulars	$
Materials inventory, beginning of year	25,000
Add: Purchases of direct materials	255,000
Cost of materials available for use	250,000
Less: Materials inventory, end of year	15,000
Cost of direct materials used	235,000

Table (1)

Therefore, the cost of direct material used during the year is $235,000.

a. 3.

To determine

Ascertain the payments of direct labor payrolls during the year.

Explanation of Solution

Direct labor: Direct labor cost is the cost of the labor that is paid to the employees who are directly involved in the process of converting the raw material into the finished goods.

Ascertain the payments of direct labor payrolls during the year as follows:

When labors are directly involved in the production process, the direct labor costs are transferred from the direct labor account to the work in process inventory account.

Therefore, the payments of direct labor payrolls during the year are $200,000.

a. 4.

To determine

Ascertain the direct labor cost assigned to production during the year.

Explanation of Solution

Ascertain the direct labor cost assigned to production during the year as follows:

When labors are directly involved in the production process, the direct labor costs are transferred from the direct labor account to the work in process inventory account. The credit entries of direct labor account are treated as direct labor assigned to the production.

Therefore, the direct labor cost assigned to production during the year is $210,000.

a. 5.

To determine

Ascertain the overhead assigned to the production stated as a percentage of direct labor costs.

Explanation of Solution

Ascertain the overhead assigned to the production stated as a percentage of direct labor costs as follows:

$\begin{array}{c}\begin{array}{l}\text{Overhead as a percentage }\\ \text{of direct labor costs}\end{array}\}=\frac{\text{Overhead assigned during the year }}{\text{Direct labor costs assigned to production}}\times 100\\ =\frac{\$420,000}{\$210,000}\times 100\\ =200\%\end{array}$

Therefore, the overhead as a percentage of direct labor costs is 200%.

a. 6.

To determine

Ascertain the total manufacturing costs charged to the work in process inventory account during the current year.

Explanation of Solution

Ascertain the total manufacturing costs charged to the work in process inventory account during the current year as follows:

Particulars	$
Direct materials used (refer part a. 2.)	235,000
Add: Direct labor costs (refer part a. 4.)	210,000
Add: Manufacturing overhead	420,000
Total manufacturing costs	865,000

Table (2)

Therefore, the total manufacturing costs charged to the work in process inventory account during the current year is $865,000.

a. 7.

To determine

Ascertain the cost of finished goods manufactured during the year.

Explanation of Solution

Ascertain the cost of finished goods manufactured during the year as follows:

Particulars	$
Work in process, beginning of the year	8,000
Add: Manufacturing costs assigned to production (refer part a. 6.)	865,000
Cost of all goods in process during the year	873,000
Less: Work in process inventory, end of year	10,000
Cost of finished goods manufactured	863,000

Table (3)

Therefore, the cost of finished goods manufactured during the year is $863,000.

a. 8.

To determine

Ascertain the cost of goods sold during the year.

Explanation of Solution

Ascertain the cost of goods sold during the year as follows:

Particulars	$
Beginning inventory of finished goods	30,000
Add: Cost of finished goods manufactured [refer part a. 7.]	863,000
Cost of goods available for sale	893,000
Less: Ending inventory of finished goods	24,000
Cost of goods sold	869,000

Table (4)

Therefore, the cost of goods sold during the year is $869,000.

a. 9.

To determine

Ascertain the total amount of inventory listed in the year-end balance sheet of Company V.

Explanation of Solution

Ascertain the total amount of inventory listed in the year-end balance sheet of Company V as follows:

Particulars	$
Materials	15,000
Work in process	10,000
Finished goods	24,000
Total inventory	49,000

Table (5)

Therefore, the total amount of inventory listed in the year-end balance sheet of Company V is $49,000.

b.

To determine

Prepare a schedule of the cost of finished goods manufactured.

Explanation of Solution

Prepare a schedule of the cost of finished goods manufactured as follows:

Company V
Schedule of the Cost of Finished Goods Manufactured
For the Year Ended December 31
Particulars	$	$
Work in process inventory, beginning of the year		8,000
Manufacturing costs assigned to production:
Direct materials used [refer part b (2)]	235,000
Direct labor	210,000
Manufacturing overhead	420,000
Total manufacturing costs		865,000
Cost of all goods in process during the year		873,000
Less: Work in process inventory, end of year		10,000
Cost of finished goods manufactured		863,000

Table (6)

Therefore, the cost of finished goods manufactured of Company V during the year is $863,000.