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[EEE COMPANY] EEE COMPANY has only Job 844 in process on March 1 of the current year
[EEE COMPANY] EEE COMPANY has only Job 844 in process on March 1 of the current year. The job has been charged with P2,000 of direct material cost, P2,500 of direct labor cost, and P1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined rate of 70% of direct labor cost. Any under- or overapplied overhead cost is closed to Cost of Goods Sold at the end of the month. During March, the following activity and amounts were recorded by the company:
Raw materials (all direct materials): Purchased during the month P31,500 Used in production P30,500
Labor: Direct labor hours worked during the month 2,500 Direct labor cost incurred P26,500 Indirect labor costs incurred P5,500
Manufacturing overhead costs incurred (total) P18,500
Inventories: Raw materials (all direct) March 31 Work in process, March 31
P7,500 P14,500
The Work in process inventory contains P5,500 of direct labor cost.
How much is the Cost of Goods Manufactured for March?
Q P67,300 Q P67,250 O P81,800 O P75,550
Expert Solution
Computation of Cost of Goods Manufactured:
Cost of Goods Manufactured = Beginning Work-in-Process + Direct Materials + Direct Labor + Overhead applied - Ending Work-in-Process
= ($2,000 + $2,500 + $1,750) + $30,500 + $26,500 + ($26,500*70%) - $14,500
= $6,250 + $30,500 + $26,500 + $18,550 - $14,500
Cost of Goods Manufactured = $67,300
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