# Cost flow relationships The following information is available for the first year of operations of Engle Inc., a manufacturer of fabricating equipment: Sales $7,270,000 Gross profit 1,450, 000 Indirect labor 330,000 Indirect materials 195,000 Other factory overhead 90,000 Materials purchased 5,100,000 Total manufacturing costs for the period 6,170,000 Materials inventory, end of period 480,000 Determine the following amounts: A. Cost of goods sold B. Direct materials cost C. Direct labor cost BuyFindarrow_forward ### Financial & Managerial Accounting 14th Edition Carl Warren + 2 others Publisher: Cengage Learning ISBN: 9781337119207 #### Solutions Chapter Section BuyFindarrow_forward ### Financial & Managerial Accounting 14th Edition Carl Warren + 2 others Publisher: Cengage Learning ISBN: 9781337119207 Chapter 16, Problem 16.2EX Textbook Problem 14 views ## Cost flow relationshipsThe following information is available for the first year of operations of Engle Inc., a manufacturer of fabricating equipment: Sales$7,270,000 Gross profit 1,450, 000 Indirect labor 330,000 Indirect materials 195,000 Other factory overhead 90,000 Materials purchased 5,100,000 Total manufacturing costs for the period 6,170,000 Materials inventory, end of period 480,000 Determine the following amounts:A. Cost of goods soldB. Direct materials costC. Direct labor cost

(a)

To determine

Cost of goods sold:

Cost of goods sold is the accumulated total of all the direct costs incurred in manufacturing the goods or the products which has been sold during a period. Cost of goods sold involves direct material, direct labor, and manufacturing overheads.

Direct Material cost:

Direct material cost is the cost of the material which is directly involved in the production. It constitutes the major portion of the total cost of the finished product. For example: The cost of plastic is the direct material for manufacturing a bottle.

Direct Labor Cost:

Direct labor cost is the cost of the labor paid to the employees who are directly involved in converting the raw materials to the finished products. It constitutes the major portion of the total cost of the finished product. For example: Wages paid to the mechanic for repairing an automobile.

To determine: the amount of cost of goods sold of E incorporation.

### Explanation of Solution

The cost of goods sold is calculated by deducting gross profit of the year from sales revenue of the company...

(b)

To determine
the amount of direct material cost of E incorporation.

(c)

To determine
the amount of direct labor cost of E incorporation.

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