•Dire Dawa Textile Factory purchased direct materials of $ 440,000 and incurred direct labor of $ 320,000 during the year ended June 30, 2015. Total factory overheads for the year were $280,000.
•The inventory balances are as follows:
July 1, 2014 June 30, 2015
Finished goods $ 90,000 $105,000
Work in process 121,000 110,000
Materials 100,000 105,000
•Required: determine
1) Direct Material used,
2) The Cost of Goods Manufactured,
3) The Cost of Goods sold.
To determine the answers to the questions, we need to calculate the following:
1) Direct Materials Used:
Direct Material used = Direct Materials Purchased - Ending Materials Inventory
Direct Materials Purchased = $440,000
Ending Materials Inventory = $105,000
Direct Materials Used = $440,000 - $105,000
Direct Materials Used = $335,000
2) Cost of Goods Manufactured:
Cost of Goods Manufactured = Direct Materials Used + Direct Labor + Factory Overheads
Direct Materials Used = $335,000
Direct Labor = $320,000
Factory Overheads = $280,000
Cost of Goods Manufactured = $335,000 + $320,000 + $280,000
Cost of Goods Manufactured = $935,000
3) Cost of Goods Sold:
Cost of Goods Sold = Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory
Beginning Finished Goods Inventory = $90,000
Ending Finished Goods Inventory = $105,000
Cost of Goods Manufactured = $935,000
Cost of Goods Sold = $90,000 + $935,000 - $105,000
Cost of Goods Sold = $920,000
Therefore:
1) Direct Material used = $335,000
2) The Cost of Goods Manufactured = $935,000
3) The Cost of Goods sold = $920,000