Chapter 18, Problem 8E

Requirement 1

To determine

To compute:

Cost of Goods manufactured for −

Garcon Company

Pepper Company

Answer to Problem 8E

Solution:

Cost of Goods manufactured for −

Garcon Company = $ 96,680

Pepper Company = $ 139,860

Explanation of Solution

The cost of goods manufactured for Garcon Company −

Garcon Company
Cost of Goods manufactured
Direct Material
Beginning raw material inventory	7,250
Add: Raw material purchases	33,000
Raw materials available for use	40,250
Less: Ending raw material inventory	5,300
Direct Material used		34,950
Direct Labor		19,000
Factory overhead
Rental cost on factory equipment	27,000
Factory utilities	9,000
Factory supplies used	8,200
Indirect Labor	1,250
Repairs - Factory equipment	4,780
Total factory overheads		50,230
Total manufacturing costs		104,180
Add: Beginning Work in process inventory		14,500
Total costs of work in process inventory		118,680
Less: Ending work in process inventory		22,000
Cost of goods manufactured		96,680

The cost of goods manufactured for Garcon Company is explained as −

Direct Material Used

The information given for direct materials −

Beginning raw material inventory = $ 7,250

Raw material purchases = $ 33,000

Ending raw material inventory = $ 5,300

  $\begin{array}{l}DirectMaterialUsed=Beginningrawmaterialinventory+Rawmaterialpurchases\\ -Endingrawmaterialinventory\\ \begin{array}{l}DirectMaterialUsed=\$7,250+\$33,000-\$5,300\hfill \\ DirectMaterialUsed=\$34,950\hfill \end{array}\end{array}$

Direct Labor

The direct labor is given as = $ 19,000.

Total factory overheads

The information given for factory overheads −

Rental cost on factory equipment = $ 27,000

Factory utilities = $ 9,000

Factory supplies used = $ 8,200

Indirect Labor = $ 1,250

Repairs - Factory equipment = $ 4,780

  $\begin{array}{l}\begin{array}{l}Totalfactoryoverheads=Rentalcostonfactoryequipment+Factoryutilities\\ +Factorysuppliesused+IndirectLabor+Repairs-Factoryequipment\end{array}\hfill \\ Totalfactoryoverheads=\$27,000+\$9,000+\$8,200+\$1,250+4,780\hfill \\ Totalfactoryoverheads=\$50,230\hfill \end{array}$

Total manufacturing costs

  $\begin{array}{l}Totalmanufacturingcosts=DirectMaterialUsed+DirectLabor+Totalfactoryoverheads\\ \begin{array}{l}Totalmanufacturingcosts=\$34,250+\$19,000+50,230\hfill \\ Totalmanufacturingcosts=\$104,180\hfill \end{array}\end{array}$

Total costs of work in process inventory

The information given for total costs of work in process inventory −

Total manufacturing costs = $ 104,180

Beginning Work in process inventory = $ 14,500

  $\begin{array}{l}Totalcostsofworkinprocessinventory=Totalmanufacturingcosts+BeginningWorkinprocess\\ \begin{array}{l}Totalcostsofworkinprocessinventory=\$104,180+\$14,500\hfill \\ Totalcostsofworkinprocessinventory=\$118,680\hfill \end{array}\end{array}$

Cost of goods manufactured

The information given for Cost of goods manufactured −

Total costs of work in process inventory = $ 118,680

Ending work in process inventory = $ 22,000

  $\begin{array}{l}Costofgoodsmanufactured=Totalcostsofworkinprocessinventory\\ -Endingworkinprocessinventory\\ \begin{array}{l}Costofgoodsmanufactured=\$118,680-\$22,000\hfill \\ Costofgoodsmanufactured=\$96,680\hfill \end{array}\end{array}$

The cost of goods manufactured for Garcon Company = $ 96,680

The cost of goods manufactured for Pepper Company −

Pepper Company
Cost of Goods manufactured
Direct Material
Beginning raw material inventory	9,000
Add: Raw material purchases	52,000
Raw materials available for use	61,000
Less: Ending raw material inventory	7,200
Direct Material used		53,800
Direct Labor		35,000
Factory overhead
Rental cost on factory equipment	22,750
Factory utilities	12,000
Factory supplies used	3,200
Indirect Labor	7,660
Repairs - Factory equipment	1,500
Total factory overheads		47,110
Total manufacturing costs		135,910
Add: Beginning Work in process inventory		19,950
Total costs of work in process inventory		155,860
Less: Ending work in process inventory		16,000
Cost of goods manufactured		139,860

The cost of goods manufactured for Pepper Company is explained as −

Direct Material Used

The information given for direct materials −

Beginning raw material inventory = $ 9,000

Raw material purchases = $ 52,000

Ending raw material inventory = $ 7,200

  $\begin{array}{l}DirectMaterialUsed=Beginningrawmaterialinventory+Rawmaterialpurchases\\ -Endingrawmaterialinventory\\ \begin{array}{l}DirectMaterialUsed=\$9,000+\$\text{ 52,000 }-\$\text{ 7,2}00\hfill \\ DirectMaterialUsed=\$\text{ 53,800}\hfill \end{array}\end{array}$

Direct Labor

The direct labor is given as = $ 35,000.

Total factory overheads

The information given for factory overheads −

Rental cost on factory equipment = $ 22,750

Factory utilities = $ 12,000

Factory supplies used = $ 3,200

Indirect Labor = $ 7,660

Repairs - Factory equipment = $ 1,500

  $\begin{array}{l}\begin{array}{l}Totalfactoryoverheads=Rentalcostonfactoryequipment+Factoryutilities\\ +Factorysuppliesused+IndirectLabor+Repairs-Factoryequipment\end{array}\hfill \\ Totalfactoryoverheads=\$22,750+\$12,000+\$3,200+7,660+\$1,500\hfill \\ Totalfactoryoverheads=\$\text{ 47,110}\hfill \end{array}$

Total manufacturing costs

  $\begin{array}{l}Totalmanufacturingcosts=DirectMaterialUsed+DirectLabor+Totalfactoryoverheads\\ \begin{array}{l}Totalmanufacturingcosts=\$53,800+\$35,000+\$47,110\hfill \\ Totalmanufacturingcosts=\$135,910\hfill \end{array}\end{array}$

Total costs of work in process inventory

The information given for total costs of work in process inventory −

Total manufacturing costs = $ 135,910

Beginning Work in process inventory = $ 19,950

  $\begin{array}{l}Totalcostsofworkinprocessinventory=Totalmanufacturingcosts+BeginningWorkinprocess\\ \begin{array}{l}Totalcostsofworkinprocessinventory=\$135,910+\$19,950\hfill \\ Totalcostsofworkinprocessinventory=\$\text{ 155,860}\hfill \end{array}\end{array}$

Cost of goods manufactured

The information given for Cost of goods manufactured −

Total costs of work in process inventory = $ 155,860

Ending work in process inventory = $ 16,000

  $\begin{array}{l}Costofgoodsmanufactured=Totalcostsofworkinprocessinventory\\ -Endingworkinprocessinventory\\ \begin{array}{l}Costofgoodsmanufactured=\$155,860-\$\text{ 16},000\hfill \\ Costofgoodsmanufactured=\$\text{ 139,860}\hfill \end{array}\end{array}$

The cost of goods manufactured for Pepper Company = $ 139,860
.

Conclusion

Thus, the costs of goods manufactured for both the companies have been computed.

Requirement 2

To determine

To compute:

Cost of goods sold for −

Garcon Company

Pepper Company

Answer to Problem 8E

Solution:

The cost of goods sold for −

Garcon Company = $ 91,030

Pepper Company = $ 143,010

Explanation of Solution

The cost of goods sold for Garcon Company −

The information given here is −

Cost of goods manufactured = $ 96,680

Beginning Finished goods inventory = $ 12,000

Ending finished goods inventory = $ 17,650

  $\begin{array}{l}Costofgoodssold=Costofgoodsmanufactured+BeginningFinishedgoodinventory\\ –Endingfinishedgoodsinventory\\ Costofgoodssold=\$96,680+\$\text{ 12},000-\$\text{ 17},650\\ Costofgoodssold=\$\text{ 91,030}\end{array}$

The cost of goods sold for Garcon Company is $ 91,030.

The cost of goods sold for Pepper Company −

The information given here is −

Cost of goods manufactured = $ 139,860

Beginning Finished goods inventory = $ 16,450

Ending finished goods inventory = $ 13,300

  $\begin{array}{l}Costofgoodssold=Costofgoodsmanufactured+BeginningFinishedgoodinventory\\ –Endingfinishedgoodsinventory\\ Costofgoodssold=\$\text{ 139},860+\$\text{ 16},450-\$\text{ 13},300\\ Costofgoodssold=\$\text{ 143,010}\end{array}$

The cost of goods sold for Pepper Company is $ 143,010.

Conclusion

Thus, the costs of goods sold for both the companies have been computed.