Bodin Company manufactures finger splints for kids who get tendonitis from playing video games. The firm had the following inventories at the beginning and end of the month of January.

January 1 January 31
Finished goods $ 126,000 $ 117,000
Work in process 233,000 251,000
Raw material 134,000 124,000
The following additional data pertain to January operations.

Raw material purchased $ 191,000
Direct labor 300,000
Actual manufacturing overhead 170,000
Actual selling and administrative expenses 120,000
The company applies manufacturing overhead at the rate of 60 percent of direct-labor cost. Any overapplied or underapplied manufacturing overhead is accumulated until the end of the year.

Required:

1. Compute the company’s prime cost for January.

2. Compute the total manufacturing cost for January

3. Compute the cost of goods manufactured for January.

4. Compute the cost of goods sold for January

5. Compute the balance in the manufacturing overhead account on January 31. Debit or Credit?

Explanation:

The computations are shown below:

1. For Prime cost

= Raw material used + Direct labor

where,

Raw material used is

= Beginning raw material inventory + raw material purchased - ending raw material inventory

= $134,000 + $191,000 - $124,000

= $201,000

And, the direct labor is $300,000

So, the prime cost is

= $201,000 + $300,000

= $501,000

2. For total manufacturing cost:

= Direct material used + direct labor cost + manufacturing overhead cos

= $201,000 + $300,000 + $300,000 × 60%

= $681,000

3. For cost of goods manufactured:

Cost of goods manufactured = Opening work in process + Manufacturing cost - ending work in process

= $233,000 + $681,000 - $251,000

= $663,000

4. For cost of goods sold

= Beginning finished goods + Cost of goods manufactured - ending finished goods

= $126,000 + $663,000 - $117,000

= $672,000

5. For balance in the manufacturing overhead account

= Actual manufacturing overhead - applied manufacturing overhead

= $170,000 - $180,000

= $10,000 credit balance i.e over applied

answer a is correct answer

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