Tisdale Company started the year with the following beginning account balances: Raw Materials Inventory,$42,000;Work in Process Inventory,$90,000;and Finished Goods Inventory,$20,000.During the year,the company purchased $60,000 of raw materials and ended the year with $16,000 of raw materials.Direct labor costs for the year were $120,000 and a total of $36,000 of manufacturing overhead costs was allocated to work in process.There was no over- or underapplied overhead.Ending work in process was $82,000 and ending finished goods was $35,000.Goods were sold to customers during the year for $360,000.How much gross margin would be reported for the year?
A) $110,000
B) $145,000
C) $125,000
D) $171,000

Question

Quizplus · Accepted Answer

Direct raw materials used = Beginning raw materials inventory + Purchases - Ending raw materials inventory
Direct raw materials used = $42,000 + $60,000 - $16,000 = $86,000
Total manufacturing costs = Direct materials used + Direct labor + Actual overhead costs
Total manufacturing costs = $86,000 + $120,000 + $36,000 = $242,000
Cost of goods manufactured = Beginning work in process + Total manufacturing costs - Ending work in process
Cost of goods manufactured = $90,000 + $242,000 - $82,000 = $250,000
Cost of goods sold = Beginning finished goods + Cost of goods manufactured - Ending finished goods
Cost of goods sold = $20,000 + $250,000 - $35,000 = $235,000
Gross margin = Sales - Cost of goods sold
Gross margin = $360,000 - $235,000 = $125,000

Tisdale Company Started the Year with the Following Beginning Account