Session 03 Solutions

# Session 03 Solutions - 156 Conversion Costs Example Problem...

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Consider the following account balances (in thousands) for the Canseco Company: \$26,000 20,000 23,000 75,000 25,000 15,000 9,000 11,000 4,000 93,000 29,000 \$22,000 21,000 18,000 Direct materials inventory Work-in-process inventory Finished goods inventory Purchases of direct materials Direct manufacturing labor Indirect manufacturing labor Plant insurance Depreciation – plant building and equipment Repairs and maintenance – plant Marketing, distribution, and customer service costs General and administrative costs End of 2009 Beginning of 2009 a) Determine the cost of goods manufactured and the cost of goods sold b) Identify the conversion costs. To illustrate the accounting for a manufacturing enterprise, consider the following example (Problem 2-31):

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Direct Materials BB 22 Purchases 75 71 DM used EB 26 Work-in-progress Finished Goods DM 71 Dr Labor 25 Indr Lab 15 Insc 9 Dep’n 11 R&M 4 EB 20 BB 18 COGM 136 136 COGM 131 COGS EB 23 BB 21 Now, let’s return to the problem, to determine the cost of goods manufactured and the cost of goods sold.

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Unformatted text preview: 156 Conversion Costs Example: Problem 6-19 Budgeting material purchases. The Mahoney Company has prepared a sales budget of 45,000 finished units for a 3-month period. The company has an inventory of 16,000 units of finished goods on hand at December 31 and has a target finished inventory of 18,000 units at the end of the succeeding quarter. It takes 3 gallons of direct materials to make 1 unit of finished product. The company has an inventory of 60,000 gallons of direct materials at December 31 and has a target ending inventory of 50,000 gallons. Compute the direct materials to be purchased during the 3 months ended 3/31. To illustrate just a part of the budget/planning process, consider the following example. Finished Goods (units) BB 16,000 Targeted EB 18,000 45,000 Forecasted Sales Production 47,000 Direct Materials (gallons) BB 60,000 Targeted EB 50,000 141,000 Req’d for Prod’n x 3 gallons/unit Purchases 131,000...
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