I will go over all possible questions I believe you can get for this scenario.
The first step would be to determine how many units are being produced each quarter (the remaining 9 months of the year). If they need to produce 145,000 in total and produced 25,000 in the 1st quarter, that leaves 120,000 for the remaining 3 quarters (or 40,000 per quarter [120,000/3]).
Raw Material:
Beginning Inventory doesn't change. There is also 1 unit of RM per finished good.
$2,200,000/27,500 = $80 p/ unit for the units purchased in the 1st quarter.
They want to end with an additional 2,500 units in RM (18,500 end-16,000 beg), so that means they need to purchase 147,500 units of RM (145,000+2,500). They already purchased 27,500 in the first quarter, which leaves 120,000 for the other 3 (or 40,000 per quarter [120,000/3]).
The cost is the same in the 1st and 2nd quarter, so the total is $5,400,000 (80*[40,000+27,500]). The cost increases for the 3rd & 4th quarter to $84 per unit (80*1.05), and the total cost would be $6,720,000 (80*[40,000+40,000]). This brings the total cost of purchased materials to $12,120,000.
Using FIFO, ending materials are valued at the higher cost, so it is $1,554,000 (18,500*84).
RM Beg Inv 1,200,000
Purchases
12,120,000RM Available for use 13,320,000
RM End Inv (1,554,000)
Cost of
DM used $
11,766,000Direct Labor (**this question):
The DL cost per unit is $7 (980,000/140,000 [the old to be produced number]). This cost will remain the same for the first 3 quarters, then it increases for the 4th.
The total cost for the first 3 is $735,000 (7*(25,000+40,000+40,000), and the new cost per unit is $7.56, which makes the cost for the 4th quarter $302,400 (7.56*40,000).
Therefore, the revised
pro forma amount of direct labor cost is $
1,037,400 (735,000+302,400).
Factory Overhead:
Indirect materials are 10% of the cost of direct materials consumed, which would make it $1,176,600 (11,766,000*0.1).
Half of general factory overhead is fixed (which is $1,400,000 [2,800,000/2]), which makes the rest variable. The VOH cost per unit is $10 ($1,400,000/140,000 [the old to be produced number]), which makes the new total VOH $1,450,000 (145,000*10).
Total factory overhead is now $
4,026,600 (1,400,000 FOH + 1,450,000 VOH + 1,176,600 InDM).
COGM and COGS:
This makes the
pro forma cost of goods manufactured $
16,830,000 (11,766,000 DM + 1,037,400 DL + 4,026,600 OH).
Beginning inventory is unchanged, but ending inventory is valued at average manufacturing cost, which is around $116.07 per unit (16,830,000/145,000). This makes ending inventory around $383,000 (116.07*3,300 [rounded]).
FG Beg Inv 930,000
COGM
16,830,000FG Available for sale 17,760,000
FG End Inv (383,000)
Pro Forma COGS $
17,377,000------------------------------
Nicholas Tsirigos
United States
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Original Message:
Sent: 08-25-2019 09:29 AM
From: MAYAR GOBRAEIL HDHOD
Subject: hi everyone cany anyone help me to solve this question
Fact Pattern: The following information was adapted from a question on Part 4 of the December 1990 CMA examination that concerned preparation of a pro forma statement of cost of goods sold. The following is Watson Corporation's pro forma statement of cost of goods sold for the year ended August 31, Year 2. Watson Corporation | Pro Forma Statement of Cost of Goods Sold | For the Year Ending August 31, Year 2 | ($000 omitted) | Direct materials: | | | Materials inventory, 9/1/Yr 1 | $ 1,200 | | Materials purchased | 11,400 | | | | | Materials available for use | 12,600 | | Materials inventory, 8/31/Yr 2 | 1,480 | | | | | Direct materials consumed | | $11,120 | Direct labor | | 980 | Factory overhead: | | | Indirect materials | 1,112 | | General factory overhead | 2,800 | 3,912 | | | | Cost of goods manufactured | | 16,012 | Add: Finished goods inventory | | | 9/1/Yr 1 | | 930 | | | Cost of goods available for sale | | 16,942 | Less: Finished goods inventory, | | 8/31/Yr 2 | (377) | | | Cost of goods sold | | $16,565 | | |
| | The results for the first quarter required the following changes in the budget assumptions: - The estimated production in units for the fiscal year should be revised from 140,000 to 145,000 units with the balance of production being scheduled in equal segments over the last 9 months of the year. The actual first quarter's production was 25,000 units.
- The planned inventory for finished goods of 3,300 units at the end of the fiscal year remains unchanged and will be valued at the average manufacturing cost for the year. The finished goods inventory of 9,300 units on September 1, Year 1, had dropped to 9,000 units by November 30, Year 1.
- Due to a new labor agreement, the labor rate will increase 8% effective June 1, Year 2, the beginning of the fourth quarter, instead of the previously anticipated effective date of September 1, Year 2, the beginning of the next fiscal year.
- The assumptions remain unchanged for direct materials inventory at 16,000 units for the beginning inventory and 18,500 units for the ending inventory. Direct materials inventory is valued on a FIFO basis. During the first quarter, direct materials for 27,500 units of output were purchased for $2,200,000. Although direct materials will be purchased evenly for the last 9 months, the cost of the direct materials will increase by 5% on March 1, Year 2, the beginning of the third quarter. One unit of raw material is used in each unit of product.
- Indirect materials costs will continue to be projected at 10% of the cost of direct materials consumed.
- One-half of general factory overhead is considered fixed.
|
Question: 20Watson's revised pro forma amount of direct labor cost is | | | | | | | |
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MAYAR GOBRAEIL HDHOD
Other
Cairo
Egypt
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