Question # 3 Caribo Ltd. presents the following data for November 2016: Direct M
ID: 2559466 • Letter: Q
Question
Question # 3 Caribo Ltd. presents the following data for November 2016: Direct Materials inventory as at 1/11/16 90 Direct Materials Purchased... Direct Materials Used Total Manufacturing Overhead Variable Manufacturing Overhead250 Total Manufacturing Costs Work in Process Inventory as at 1/11/16200 Cost of Goods Manufactured Finished Goods Inventory as at 1/11/16125 360 375 480 1,600 1,650 Cost of Goods Sold. 1,700 A) Calculate the following costs: 1) Direct Material Inventory as at 31/11/16 2) Direct Manufacturing Labour cost for November 3) Work in Process Inventory as at 31/11/16 4) Goods available for sale in November 5) Finished goods Inventory as at 31/11/16 B) Distinguish between inventoriable costs and period costs.Explanation / Answer
A)
1. Direct materials inventory as at 31/11/16
Direct materials inventory 1/11/16 = 90
Direct materials purchased = 360
Direct materials available for production = 450
Direct materials used = (375)
Direct materials inventory as on 31/11/16 = 75
2) Direct manufacturing cost for november
Total manufacturing costs = 1600
Less: Direct materials used = (375)
Total manufacturing overhead costs = (480)
Direct manufacturing costs for november = 745
3) Work in process inventory as at 31/11/16
Work-in-process inventory 1/11/16 = 200
Total manufacturing costs = 1600
Work-in-process available for production = 1800
Subtract: Cost of goods manufactured (moved into FG) = (1650)
Work-in-process inventory 31/11/16 = 150
4) Goods available for sale in November
Finished goods inventory 1/11/16 125
Cost of goods manufactured (moved from WIP) 1650
Cost of finished goods available for sale in november 1775
5) Finished goods inventory as at 31/11/16
Finished goods available for sale in november 2016(from requirement 4) 1775
Subtract: Cost of goods sold (1700)
Finished goods inventory 31/11/16 75
B)
Inventoriable and period costs are also a type of classifications of costs. Inventoriable costs can be defined as costs which become part of inventories such as raw material, work in progress and finished goods inventory present in the balance sheet of any business. On the other hand, period costs are all other costs that are not inventoriable costs. Period costs are those costs which are incurred and expensed in Profit and Loss Statement in the period they are incurred.
DIFFERENCE BETWEEN INVENTORIABLE AND PERIOD COSTS
Sr. No. Inventoriable Costs Period Costs 1 These costs may be incurred in one period and expensed in another year. These costs are incurred and expensed in the same period. 2 These costs become part of any of the three inventories – raw material, work in progress and finished goods. These costs do not form part of any inventories. 3 Becomes part of the balance sheet in the form of inventories on the assets side. Do not become part of the balance sheet in any form. 4 These costs exist in manufacturing and trading concerns. These costs exist in manufacturing, trading, and service concerns.