Quiz COGM Malone Corporation which uses an actual costing sy

Quiz COGM Malone Corporation, which uses an actual costing system, had the following account balances for May: 05/01 8,000 13,000 5,000 Raw materials inventory Work-in-process inventory 8,300 8,900 Finished goods inventory Other important information: Raw materials purchased on account Direct materials used Indirect materials used* Direct labor payroll Indirect labor payrol Administrative payroll Utilities (70% incurred in the factory) Depreciation (80% related to the factory) Building rent (factory occupies 60% of the building $75,000 21,200 2,500 50,000 7,000 21,100 8,700 9,000 12,000 * Raw materials is used to track both direct and indirect materials Compute the following and label your answers: a. Compute the period cost and prime cost incurred during May. Compute the cost of goods manufactured for May. c. Compute the cost of goods sold for May. i. What level of May sales would have generated an operating loss of $22,4002 b.

Solution

Answer a Computation of period cost and prime cost Prime Cost Period cost Direct Material used $21,200 Direct Labour $50,000 Administrative payroll $21,100 Utilities [$8700*30%] $2,610 Depreciation [$9000*20%] $1,800 Building Rent [$12000*40%] $4,800 Total cost $71,200 $30,310 Answer b Cost of goods manufactured for May Direct Material Used $21,200 Direct Labour $50,000 Factory Overheads - Indirect Material $2,500 - Indirect Labour $7,000 - Utilities $6,090 - Depreciation $7,200 - Building Rent $7,200 $29,990 Cost of Manufacturing $101,190 Add : Work in process 05/01 $13,000 Less : Work in process 05/31 $8,300 Cost of goods manufactured for May $105,890 Answer c Cost of goods sold for May Cost of goods manufactured $105,890 Add : Finished Goods Inventory 05/01 $5,000 Less : Finished Goods Inventory 05/31 $8,900 Cost of goods sold for May $101,990 Answer d Level of May sales Operating loss -$22,400 Add : Cost of goods sold $101,990 Add : Period cost $30,310 Level of May sales $109,900