Case Study 1 Case Study I Solution Template -

The following cost items are needed before a schedule of cost of goods manufactured can be prepared:

Materials used in production (Remember raw materials used are NOT always the same as raw materials purchased so you must calculate it!): Prime Costs $545,000
Less Direct Labor Cost 220,000
Direct Materials Cost $325,000

Manufacturing Overhead Cost:
The problem states direct labor cost and % mfg ovhd is of conversion cost , so you can figure out the % direct labor is of conversion cost and use the formula to calculate conversion cost
Direct Labor Cost/ Percentage of Conversion Cost = Conversion Cost
220,000 35% $628,571 rounded to nearest dollar ( this is total conversion cost)

100%-65% = 35% Given:
Material Purchases $325,000
Conversion Cost from your calculation above $628,571 Direct Labor $220,000 Less Direct Labor Cost 220,000 Sales $1,350,000 Manufacturing Overhead $408,571 Gross Margin 30% Costs of Good Avilable for Sale $1,020,000 Cost of Goods Manufactured: Prime Costs $545,000 Manufacturer Overhead 65% Cost of Goods Available for Sale $1,020,000 Raw Materials $41,000 Less: finished goods inventory, beginning 35,000 Work in Progress $56,000 Cost of Goods Manufactured $985,000 Finished Goods $35,000

The easiest way to proceed from this point is to place all of the amounts that are known in a partially completed schedule of cost of goods manufactured and a partially completed income statement. Then fill in the missing amounts by analyzing the available data.

Direct Materials: Raw Materials Inventory, beginning $41,000 Add: Purchases of Raw...
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