895,000
Deduct: Work in process inventory, ending ... B
Cost of goods manufactured (see above) ... $765,000
Therefore, “A” (Raw materials inventory, ending) would be $78,000; and
“B” (Work in process inventory, ending) would be $130,000.
Sales... $1,200,000
Less cost of goods sold:
Finished goods inventory, beginning... $ 45,000
Add: Cost of goods manufactured (see above). 765,000
Goods available for sale ... 810,000
Deduct: Finished goods inventory, ending... C 720,000
Gross margin ... $ 480,000
*$1,200,000 × (100% – 40%) = $720,000.
Therefore, “C” (Finished goods inventory, ending) would be $90,000.
The procedure outlined above is just one way in which the solution to
the case can be approached. Some may wish to start at the bottom of
the income statement (with gross margin) and work upwards from that
point. Also, the solution can be obtained by use of T-accounts.
Case 2-31 (60 minutes)
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