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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

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Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207

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Section
BuyFindarrow_forward

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207
Chapter 16, Problem 16.2EX
Textbook Problem
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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

(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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Chapter 16 Solutions

Financial & Managerial Accounting
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Ch. 16 - Issuance of materials On May 7, Bergan Company...Ch. 16 - Direct labor costs During May, Herman Company...Ch. 16 - Factory overhead costs During May, Bergan Company...Ch. 16 - Applying factory overhead Bergan Company estimates...Ch. 16 - Job costs At the end of May, Bergan Company had...Ch. 16 - Cost of goods sold Pine Creek Company completed...Ch. 16 - Transactions in a job order cost system Five...Ch. 16 - Cost flow relationships The following information...Ch. 16 - Cost of materials issuances under the FIFO method...Ch. 16 - Entry for issuing materials Materials issued for...Ch. 16 - Entries for materials GenX Furnishings Company...Ch. 16 - Entry for factory labor costs A summary of the...Ch. 16 - Entry for factory labor costs The weekly time...Ch. 16 - Entries for direct labor and factory overhead...Ch. 16 - Factory overhead rates, entries, and account...Ch. 16 - Predetermined factory overhead rate Spring Street...Ch. 16 - Predetermined factory overhead rate Poehling...Ch. 16 - Entry for jobs completed; cost of unfinished jobs...Ch. 16 - Entries for factory costs and jobs completed Old...Ch. 16 - Financial statements of a manufacturing firm The...Ch. 16 - Job order cost accounting for a service company...Ch. 16 - Job order cost accounting for a service company...Ch. 16 - Entries for costs in a job order cost system...Ch. 16 - Entries and schedules for unfinished jobs and...Ch. 16 - Job order cost sheet Remnant Carpet Company sells...Ch. 16 - Analyzing manufacturing cost accounts Fire Rock...Ch. 16 - Flow of costs and income statement Ginocera Inc....Ch. 16 - Entries for costs in a job order cost system Royal...Ch. 16 - Entries and schedules for unfinished jobs and...Ch. 16 - Job order cost sheet Stretch and Trim Carpet...Ch. 16 - Analyzing manufacturing cost accounts Clapton...Ch. 16 - Row of costs and income statement Technology...Ch. 16 - Ethics in Action TAG Industries Inc. sells heavy...Ch. 16 - Team Activity As an assistant cost accountant for...Ch. 16 - Carol Creedence, the plant manager of the...

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