Where is the 24000 came from 44 Tierney Construction Inc rec

Where is the 24,000 came from?

44. Tierney Construction, Inc. recently lost a portion of its financial records in an office theft. The following accounting information remained in the office files Cost of goods sold Work in process inventory, January 12010 Work process inventory, December 312010 Sellig and Administrative Expenses Net Incoue l\'actory overlcad Direct materials mentov. Tamary 12010 Direct materials Inventory. December 31 , 2010 Cost of goods manufactured Finished goods mventory, January 12010 $80,000 18,500 14,500 16,000 25,000 20,000 26,000 14,000 98,000 31,000 Direct labor cost incurred during the period amounted to 2.5 times the factory overhead. The CFO of Tierney Construction, Inc.has asked you to recalculate the following accounts and to report to him by the end of tomorrow What should be the amount of direct materials purchased? A. $28,000 B. $19,000 C. $15,000 D. $12,000 $12,000 = $24,000-($26,000-$14,000,-$12,000

Solution

Answer:

Cost of Goods Manufactured = Work in process, Beginning + Direct Materials Used in Production + Direct Labor + Factory Overhead – Work In Process, Ending

$98,000 = $18,500 + Direct Materials Used in Production + ($20,000 * 2.5) + $20,000 - $14,500
$98,000 = $18,500 + Direct Materials Used in Production + $50,000 + $20,000 - $14,500
$98,000 = $74,000 + Direct Materials Used in Production
Direct Materials Used in Production = $24,000

Direct Material Purchased = Direct Materials Used in Production – (Direct Material, Beginning – Direct Material, Ending)
Direct Material Purchased = $24,000 – ($26,000 - $14,000)
Direct Material Purchased = $24,000 - $12,000
Direct Material Purchased = $12,000