reduce customer complaints, for example. By preparing the same information in July, Paul can see how he is improving (or becoming worse) in reducing nonvalue-added activities. Solutions to Problems (30 min.) Cost Concepts: Santa Inez, Inc. a. Prime costs = direct materials + direct labor Direct materials = beginning inventory + purchases ending inventory – = $12,000 + $160,000 $10,000 – = $162,000 Direct labor is given as $128,000 Prime costs = $162,000 + $128,000 = $290,000 b. Conversion costs = Direct labor + Manufacturing overhead Conversion costs = $128,000 + $168,000 = $296,000 c. Total manufacturing costs = Direct materials + Direct labor + Manufacturing overhead = $162,000 (from a above) + $128,000 + $168,000 = $458,000 d. Cost of goods Beginning Work In Process + Total manufacturing costs manufactured = Ending Work In Process – = $6,000 + $458,000 (from c above) $4,000 – = $460,000 e. Cost of Cost of Beginning Ending = Goods + Finished Finished – Sold Manufactured Goods Goods Inventory Inventory = $460,000 + $36,000 $48,000 – (from d above)
reduce customer complaints, for example. By preparing the same information in July, Paul can see how he is improving (or becoming worse) in reducing nonvalue-added activities. Solutions to Problems (30 min.) Cost Concepts: Santa Inez, Inc. a. Prime costs = direct materials + direct labor Direct materials = beginning inventory + purchases – ending inventory = $12,000 + $160,000 – $10,000 = $162,000 Direct labor is given as $128,000 Prime costs = $162,000 + $128,000 = $290,000 b. Conversion costs = Direct labor + Manufacturing overhead Conversion costs = $128,000 + $168,000 = $296,000 c. Total manufacturing costs = Direct materials + Direct labor + Manufacturing overhead = $162,000 (from a above) + $128,000 + $168,000 = $458,000 d. Cost of goods manufactured = Beginning Work In Process + Total manufacturing costs – Ending Work In Process = $6,000 + $458,000 (from c above) – $4,000 = $460,000 e. Cost of Sold = Cost of Goods Manufactured + Beginning Finished Goods Inventory – Ending Finished Goods Inventory = $460,000 + $36,000 – $48,000 (from d above)