Taylor Industries had a fire and some of its accounting reco

Taylor Industries had a fire and some of its accounting records were destroyed. Available information is presented below for the year ended December 31.

Additional information:

Factory overhead is 150% of direct labor cost.

Finished goods inventory decreased by $18,000 during the year.

Work in process inventory increased by $12,000 during the year.

a. Calculate Materials inventory, January 1.
$

b. Calculate direct labor cost.
$

c. Calculate factory overhead incurred.
$

d. Calculate cost of goods sold.
$

Solution

(a)Materials inventory, January 1= $9,900

Materials inventory, January 1= Materials inventory, December 31 + Direct Materials used – Direct materials purchased

= $15,000 + 22,900 – 28,000

= $9,900

(b) Direct labor cost = $49,640

$135,000 + 12,000 = $147,000 Total Manufacturing cost

$147,000 – 22,900 = $124,100 Direct Labor and Factory overhead

Let’s take “x” as Direct labor cost

“x” + 1.5x = $124,100

2.5x = $124,100

“x” = $124,100 / 2.5 = $49,640

(c) Factory overhead incurred = $74,460

Factory overhead incurred = $49,640 x 150% = $74,460

(d) Cost of goods sold = $153,000

Cost of goods sold = Cost of goods manufactured + Decrease in finished goods inventory

= $135,000 + 18000

= $153,000