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Amazon Company produces radios for cars. The following cost information is available for the period ended December 31, 2019: 

February 13, 2024 admin Accounting 0

Amazon Company produces radios for cars. The following cost information is available for the period ended December 31, 2019: 
Materials put into production Tk. 1,20,000, of which Tk. 80,000 was for direct materials. Factory labour costs for the period Tk. 90,000, of which Tk. 25,000 was for indirect labour. Factory overhead costs for utilities Tk. 40,000. Work-in-process beginning and ending value were Tk. 12,000 and Tk. 20,000 respectively. Required: Calculate cost of goods manufactured (show prime costs and total manufacturing costs in your calculations). 

Ans 1.

Cost of Goods Manufactured (COGM) for Amazon Company:

1. Prime Costs:

  • Direct materials: Tk. 80,000
  • Direct labor (factory labor excluding indirect labor): Tk. 90,000 – Tk. 25,000 = Tk. 65,000 Total Prime Costs: Tk. 80,000 + Tk. 65,000 = Tk. 145,000

2. Total Manufacturing Costs:

  • Prime costs: Tk. 145,000
  • Indirect labor: Tk. 25,000
  • Factory overhead: Tk. 40,000 Total Manufacturing Costs: Tk. 145,000 + Tk. 25,000 + Tk. 40,000 = Tk. 210,000

3. Calculation of Cost of Goods Manufactured (COGM):

Method 1 (Using WIP)

COGM = Beginning WIP + Total Manufacturing Costs – Ending WIP = Tk. 12,000 + Tk. 210,000 – Tk. 20,000 = Tk. 202,000

Method 2 (Without WIP)

Direct materials used = Materials put into production – Ending WIP of materials = Tk. 1,20,000 – Tk. 8,000 (assuming ending WIP of materials is Tk. 12,000 – Tk. 4,000 direct materials) = Tk. 1,12,000

COGM = Direct materials used + Direct labor + Indirect labor + Factory overhead = Tk. 1,12,000 + Tk. 65,000 + Tk. 25,000 + Tk. 40,000 = Tk. 242,000

Note: The two methods should give the same answer, but due to potential assumptions about WIP breakdown, there might be a slight difference. The actual answer depends on the specific breakdown of work-in-process provided.

Therefore, the cost of goods manufactured for Amazon Company for the period ended December 31, 2019, is between Tk. 202,000 and Tk. 242,000. Without more information about the specific WIP breakdown, we cannot determine the exact figure.

or

Ans 2.

To calculate the cost of goods manufactured, you’ll need to consider the prime costs and total manufacturing costs. Here’s how you can calculate them:

  1. Prime Costs:
  • Prime costs include direct materials, direct labor, and direct expenses. [ \text{Direct Materials} + \text{Direct Labor} ] [ Tk. 80,000 + Tk. 90,000 ] [ \text{Prime Costs} = Tk. 1,70,000 ]
  1. Total Manufacturing Costs:
  • Total manufacturing costs include prime costs and factory overhead costs. [ \text{Prime Costs} + \text{Factory Overhead} ] [ Tk. 1,70,000 + Tk. 40,000 ] [ \text{Total Manufacturing Costs} = Tk. 2,10,000 ]
  1. Cost of Goods Manufactured:
  • Cost of goods manufactured is the total manufacturing costs plus the change in work-in-process inventory. [ \text{Total Manufacturing Costs} + (\text{Beginning WIP} – \text{Ending WIP}) ] [ Tk. 2,10,000 + (Tk. 12,000 – Tk. 20,000) ] [ \text{Cost of Goods Manufactured} = Tk. 2,02,000 ]

So, the cost of goods manufactured is Tk. 2,02,000. The prime costs are Tk. 1,70,000, and the total manufacturing costs are Tk. 2,10,000.