Explanation Ending raw material inventory On the basis of the information provided, as a first step calculates direct material used. Direct material costs are the cost of primary material which is the part of the finished goods and this cost is directly attributable to the finished goods. The direct material used is a part of the total manufacturing costs . Total manufacturing costs include direct material, direct labor, manufacturing overhead and beginning work in process inventory. All other line items are provided in the question except direct material used. Therefore, calculate direct material used by deducting direct labor, manufacturing overhead and beginning work in process inventory from the total manufacturing costs. Direct material used = Total manufacturing costs – Direct labor – Manufacturing overhead – Beginning work in process inventory Total manufacturing costs incurred are $1,515,000. From this, deduct direct labor costs of $523,000, manufacturing overheads of $213,000 and beginning work in process inventory of $206,000. This will give the cost of direct material used. The total cost of direct material used by FDD is $573,000 (1) . Direct material used = Total manufacturing costs - Direct labor - Manufacturing overhead - Beginning work in process inventory = $1,515,000 - $523,000 - $213,000 - $206,000 = $573,000 ...... (1) After determining direct material used, calculate ending raw material inventory. To calculate ending raw material inventory add direct material purchases to the beginning raw material inventory. This gives material available for use. From this deduct direct material used. This gives ending raw material inventory. Ending raw material inventory = Beginning raw material inventory + Purchases of direct material – Direct material used The beginning raw material inventory is $85,000. To this add direct material purchases of $541,000 and deduct direct material used of $573,000 (1). The ending raw material inventory for company FDD is $53,000 (2). Ending raw material inventory = Beginning raw material inventory + Purchases - Direct material used = $85,000 + $541,000 - $573,000 = $53,000 ...... (2) Calculation of ending raw material inventory Particulars Amount ($) Beginning a raw material inventory 85,000 Add: Direct material purchases 541,000 Material available for use 626,000 Less: Direct material used (1) 573,000 Ending raw material inventory (2) 53,000 Table (1) Ending work in process inventory Work in process inventory refers to those goods which are no longer part of raw material inventory and not yet become the part of finished goods inventory. These are the company’s partially completed goods. In order to calculate ending work in process inventory first calculate the cost of goods manufactured. Cost of goods manufactured is the total cost incurred in manufacturing the goods or the cost incurred in sourcing the goods from the merchandiser for reselling. Calculate the cost of goods manufactured by deducting beginning work in process inventory from the cost of goods available for sale. Beginning work in process inventory is $206,000. Cost of goods available for sale is $1,415,000. To determine the cost of goods manufactured deduct beginning work in process inventory from the cost of goods available for sale. Cost of goods manufactured for FDD is $1,209,000 (3). Cost of goods manufactured = Cost of goods available for sale - Beginning work in process inventory = $1,415,000 - $206,000 = $1,209,000

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ISBN: 9780133428377

Author: Karen W. Braun, Wendy M. Tietz

Publisher: PEARSON

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Chapter 2, Problem 2.43AP

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Ch. 2 - S2-2 Identify types of companies and their...Ch. 2 - S2-1 Identify type of company from balance sheets...Ch. 2 - S2-3 Classify costs by value chain function...Ch. 2 - 52-4 Classify costs as direct or indirect...Ch. 2 - Prob. 2.5SE Ch. 2 - Prob. 2.6SE Ch. 2 - Prob. 2.7SE Ch. 2 - Prob. 2.8SE Ch. 2 - Prob. 2.9SE Ch. 2 - Prob. 2.11SE Ch. 2 - Prob. 2.10SE Ch. 2 - S2-12 Calculate direct materials used (Learning...Ch. 2 - Prob. 2.13SE Ch. 2 - Prob. 2.14SE Ch. 2 - Prob. 2.15SE Ch. 2 - Prob. 2.16SE Ch. 2 - Prob. 2.17SE Ch. 2 - E2-18A Classify costs along the value chain for a...Ch. 2 - Prob. 2.19AE Ch. 2 - E2-20A Value chain and sustainability efforts...Ch. 2 - Prob. 2.21AE Ch. 2 - Prob. 2.22AE Ch. 2 - Prob. 2.27AE Ch. 2 - Prob. 2.23AE Ch. 2 - Prob. 2.24AE Ch. 2 - E2-25A Compute Cost of Goods Manufactured and Cost...Ch. 2 - Prob. 2.26AE Ch. 2 - Prob. 2.28AE Ch. 2 - Prob. 2.29AE Ch. 2 - Prob. 2.30BE Ch. 2 - Prob. 2.31BE Ch. 2 - Prob. 2.32BE Ch. 2 - Prob. 2.33BE Ch. 2 - Prob. 2.34BE Ch. 2 - E2-39B Work backward to find missing amounts...Ch. 2 - E2- 35 B Prepare a retailer’s income statement...Ch. 2 - E2-36B Compute direct materials used and Cost of...Ch. 2 - Prob. 2.37BE Ch. 2 - E2-38B Continues E2-37B: Prepare income statement...Ch. 2 - E2-40B Determine whether information is relevant...Ch. 2 - Prob. 2.41BE Ch. 2 - Prob. 2.42AP Ch. 2 - Prob. 2.43AP Ch. 2 - P2-44A Prepare income statements (Learning...Ch. 2 - Prob. 2.45AP Ch. 2 - Prob. 2.46AP Ch. 2 - Prob. 2.47BP Ch. 2 - Prob. 2.48BP Ch. 2 - Prob. 2.49BP Ch. 2 - P2-50B Identify relevant information (Learning...Ch. 2 - Prob. 2.51BP Ch. 2 - Prob. 2.52ACT

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