case study hrm

1. Case Study 1
Information
Materials Purchased $325,000
Direct Labor $220,000
Sales $1,350,000
Gross Margin 30%
Cost of Goods Available for sale $1,020,000
Prime Costs $545,000
Manufacturer Overhead 65% of the conversion
Direct Materials $325,000
Beginning Balance
Raw Materials $41,000
Work In Progress $56,000
Finished Goods $35,000
Solve:
Conversion Cost = Manufacturing overhead + Direct Labor
Manufacturing overhead = 65% of conversion
Direct Labor = $220,000
Direct = 35% of conversion costs 35%
220,000 = 35% of conversion
220,000 / 0.35 = Conversion Cost
Conversion Cost = Manufacturing Overhead + Direct labor $628,571
Direct Labor = $220,000
Manufacturing Overhead $408,571

2. Prime Cost = Direct material Cost + Direct Labor Cost
545,000 = Direct Material Cost + 220,000
Direct Material Cost = 545,000 – 220,000
Direct material Cost = 325,000
Therefore,
The Raw Material Cost $325,000
Work In Progress $24,471
Finished Goods Inventory $75,000

3. Solution
Calculating Gross Margin
Sales $135,000
Cost of Goods sold:
Beginning finished goods inventory 35,000
Add: cost of goods manufactured 985,000
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Cost of Goods Available for Sale 1,020,000
Minus:
Ending Finished Goods Inventory 75,000 945,000
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Gross Margin $405,000
Gross Margin = 30% ($1,350,000)
Cost of Goods Sold
Beginning Bal. finished goods $35,000
Add:
Cost of goods manufactured 985,000
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Goods available for sale 1,020,000
Less:
Ending bal. finished goods 945,000
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Cost of goods sold $75,000
Total Manufacturing cost
Direct Material Cost $325,000
Direct Labor 220,000
Manufacturing Overhead 408,471
----------------
Total Manufacturing cost $953,471

4. Cost of Goods Manufactured
Beginning Balance work in progress $56,000
Total manufacturing cost 953,471
Less:
Ending Bal. work in progress 24,471
----------------
Cost of goods manufactured $985,000
Cost of goods manufactured
Direct Materials
Beginning Raw materials Inventory $41,000
Add:
Purchases of raw materials 325,000
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Raw materials available for use 366,000
Minus:
Ending Raw materials inventory 41,000
----------------- -------------------
Raw Material used in production $325,000
Direct Labor 220,000
Manufacturing Overhead 408,471
Total Manufacturing Cost 953,471
Add:
Beginning work in progress inventory 56,000
Less:
Ending work in progress Inventory 24,471
--------------
Cost of goods manufactured $985,000