During the month of June, Reardon Company incurred $17,000 of direct labour, $8,500 of manufacturing overhead and purchased $15,000 of raw materials. Between the beginning and the end of the month, the raw materials inventory increased by $2,000, the finished goods inventory increased by $1,500, and the work in process inventory decreased by $3,000. The cost of goods manufactured would be:
A)$40,500.
B)$43,500.
C)$38,500.
D)$41,500.

Question

Quizplus · Accepted Answer

To calculate the cost of goods manufactured, we need to use the formula:

Beginning work in process inventory + Total manufacturing costs - Ending work in process inventory = Cost of goods manufactured

We are given:

- Direct labor = $17,000
- Manufacturing overhead = $8,500
- Raw materials purchased = $15,000
- Increase in raw materials inventory = $2,000
- Increase in finished goods inventory = $1,500
- Decrease in work in process inventory = $3,000

To calculate the total manufacturing costs, we can use the formula:

Total manufacturing costs = Direct labor + Manufacturing overhead + Raw materials used

Raw materials used = Raw materials purchased - Increase in raw materials inventory
Raw materials used = $15,000 - $2,000
Raw materials used = $13,000

Total manufacturing costs = $17,000 + $8,500 + $13,000
Total manufacturing costs = $38,500

Now we can use the formula to calculate the cost of goods manufactured:

Beginning work in process inventory + Total manufacturing costs - Ending work in process inventory = Cost of goods manufactured

We are given:

- Decrease in work in process inventory = $3,000

Beginning work in process inventory + $38,500 - $3,000 = Cost of goods manufactured

The beginning work in process inventory is not given. However, we can assume that it is $0, since the problem does not mention any beginning work in process inventory. Therefore:

$0 + $38,500 - $3,000 = Cost of goods manufactured
Cost of goods manufactured = $35,500

However, we also know that the finished goods inventory increased by $1,500. This means that the cost of goods manufactured plus the increase in finished goods inventory should equal the cost of goods sold. Therefore:

Cost of goods manufactured + Increase in finished goods inventory = Cost of goods sold

$35,500 + $1,500 = Cost of goods sold
Cost of goods sold = $37,000

Therefore, the correct answer is:

D) $41,500

During the Month of June, Reardon Company Incurred $17,000 of Direct