Question

Shen Company reports the costs incurred below for the month ended May 31. The company has no beginning Work in Process Inventory. Overhead is applied using a predetermined overhead rate of 120% of direct materials costs. Job 4 was completed and Job 5 is still in process at month-end. Prepare a schedule of cost of goods manufactured for the month.

Answer 1

Based on the costs incurred by Shen Company, the schedule of costs of goods sold for manufactured goods is:

                                                                                 Total

Direct materials used                                            $6,300

Direct labor                                                             $4,390

Manufacturing overhead                                      $7,560

Total cost                                                               $18,250

Beginning WIP                                                            $0

Add: Cost during year                                           $18,250

Total manufacturing cost                                      $18,250

Less; Ending WIP                                                   $(6,770)

Cost of goods manufactured                               $11,480

What goes into the schedule of cost of goods manufactured?

Direct materials:

= 3,400 + 2,900

= $6,300

Direct labor:

= 4,000 + 390

= $4,390

Manufacturing overhead:

= 6,300 x 1.2

= $7,560

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Answer 2

The schedule of Cost of Goods Manufactured for May by Shen Company is as follows:

Cost of Goods Manufactured:

Direct materials       $3,400

Direct labor               4,000

Overhead applied    4,080 ($3,400 x 120%)

Total costs            $11,480

What is the Cost of Goods Manufactured?

The cost of goods manufactured includes the costs of direct materials, direct labor, and overhead applied.

The cost of goods manufactured is only for Job 4 and does not include the costs incurred for Job 5 which is still in process at month-end.  Instead, the costs of Job 5 will be recorded as ending work in process.

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