Assignment 2: Calculating Inventory

Assignment 2 Calculating Inventory Finland Upholstery Inc. Oscar L. Galvan Argosy University The firms change and administrative expenses be operating expenses therefore they are treated as level monetary value rather that Product speak to. This type of bell is unrelated to manu itemuring command processing smash-up time and cost of goods exchange. Manufacturing overheadManufacturing smasher includes all costs of manufacturing such as in lead material, in forecast grasp, property taxes, maintenance and repairs, insurance etc. It excludes the direct material and direct labor.The selling and administrative expenses give non be reported in the manufacturing command processing overhead time since they are not incurred for the production of the goods. Cost of Goods Sold Cost of goods sold is a cost incurred to obtain the rough material for the production andfor producing the products that are sold to the consumers. Cost of goods sold (Beginning mathematical product farm animal + inventory purchases ending inventory. ) Since the selling and administrative expenses are not incurred for obtaining the raw material as well as manufacturing the product they will not be reported in the cost of goods sold.Selling and Administrative Expenses The selling and administrative expenses are incurred for delivering the goods to the consumers, and also for the advertising of the products. The following are examples precaution expenses, tradesman salaries, clerical expenses and advertisement expenses. 1. Calculate the companys predetermined overhead application rate. Budgeted Overhead 5,460,000 Budgeted Direct Labor 4,200,000 Predetermined Overhead regulate 130% 2. Calculate the additions to the work-in-process inventory account for the direct material used, direct labor and manufacturing overhead. Direct Mat erial used 5,600,000 Direct Labor 4,350,000 Manufacturing overhead 5,655,000 meat Addition 15,605,000 . Calculate the finished-goods inventory for the 12/31/01 symmetry sheet. Direct material cost 156,000 Direct labor 85,000 Manufacturing overhead 110,500 spotless goods inventory 351,500 All amounts in the Work-in-Process must be transferred to Finished-Goods-Inventory due to the fact that there is no Work-in-Process at year end. Therefore Dr. Cr. Finished goods inventory 5,811,800 Work in process Inventory 5,811,800 4. Calculate the over-applied/under-applied overhead at year end Applied overhead 5,655,000. 00 Actual overhead 5,554,000. 00 O ver-applied overhead 101,000. 00 Calculation of Actual Overhead Indirect materials used 65,000. 00 Indirect labor 2,860,000. 00 Factory depreciation 1,740,000. 0 Factory insurance 59,000. 00 Factory utilities 830,000. 00 Total 5,554,000. 00 Dr. Cr. Manufacturing Overhead $5,554,000 Cost of Goods Sold $5,554,000 5.Explain if it is appropriate to include selling and administrative expenses in the cost of goods sold category. Companys cost of goods sold totals $15,309,300 Finished-goods inventory, Jan 1 0. 00 Add Cost of goods manufactured 15,761,800. 00 Cost of goods available for sale $15,761,800. 00 Less Finished-goods inventory, De c. 1 351,500. 00 Unadjusted cost of goods sold 15,410,300. 00 Less Over applied overhead 101,000. 00 Cost of goods sold $15,309,300. 00 The firms selling and administrative expenses are operating expenses therefore they are treated as Period Cost rather that Product Cost. This type of cost is unrelated to manufacturing overhead and cost of goods sold.