Using the following information compute the direct materials

Using the following information, compute the direct materials used.

Raw materials inventory, January 1                          $     20,000

Raw materials inventory, December 31                          40,000

Work in process, January 1                                                    18,000

Work in process, December 31                                            12,000

Finished goods, January 1                                                      40,000

Finished goods, December 31                                              32,000

Raw materials purchases                                                 1,400,000

Direct labor                                                                                 560,000

Factory utilities                                                                         150,000

Indirect labor                                                                                50,000

Factory depreciation                                                              400,000

Operating expenses                                                                420,000

a. $1,460,000.

b. $1,420,000.

c. $1,400,000.

d. $1,380,000.

Why it\'s D ????

Solution

OPTION (d) is correct:i.e Solution=$ 13,80,000

COMPUTATION OF DIRECT MATERIALS USED:

Direct Material Used:

Raw Material Inventory(Jan 1)---------$    20,000

Add: Purchases of Raw Materials-------$14,00,000

Raw Materials available for use---------$ 14,20,000

Less: Raw Materials Inventory(Dec 31)$      40,000

Raw Material Used/Direct material used $13,80,000

          Alternative method for calculation of Direct Material Used:

Direct Material used=Opening stock of Raw material+ Purchaseof Raw Material-Closing stock of Raw Material

                                     = $ 20,000 +$ 14,00,000-$40,000

                                      =$ 13,80,000