Caribo Ltd. presents the following data for November 2016. Direct materials inve

Question

Caribo Ltd. presents the following data for November 2016.

Direct materials inventory as at 1/11/16 ………………………….. $90

Direct material purchased …………………………………………………$ 360

Direct material used ………………………………………………………… $ 375

Total manufacturing overhead ………………………………………… $ 480

Variable manufacturing overhead …………………………………… $ 250

Total manufacturing costs ………………………………………………. $ 1,600

Work in process inventory as at 1/ 11/16 ……………………….. $200

Cost of goods manufactured …………………………………………… $ 1,650

Finished Goods inventory as at 1/11/16 …………………………. $ 125

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 cost and period cost

Explanation / Answer

Solution:

Part 1) --- Direct material inventory as at 31/11/16*

Direct material used = Beginning inventory 1/11/16 + Purchases – Direct material Inventory 31/11/16

375 = 90 + 360 - Direct material Inventory 31/11/16

Direct material Inventory 31/11/16 = $75

Part 2 -- Direct manufacturing labour cost for November

Total Manufacturing Costs = Cost of Direct material used + Cost of Direct Labor + Total Manufacturing Overhead

$1,600 = $375 + Cost of Direct labor + $480

Cost of Direct labor = $745

Part 3 -- Work in process inventory as at 31/11/16

Cost of goods manufactured = WIP Inventory 1/11/16 + Total Manufacturing Cost – WIP Inventory 31/11/16

$1,650 = $200 + $1,600 – WIP Inventory 31/11/16

WIP Inventory 31/11/16 = $150

Part 4 --- Goods available for sale in November

Goods available for sale in November = Cost of Goods Manufactured + Finished Goods Inventory 1/11/16

= $1,650 + $125

= $1,775

Part 5 -- Finished goods inventory as at 31/11/16

Finished goods inventory as at 31/11/16 = Cost of Goods Available for Sale – Cost of Goods sold

= $1,775 - $1,700

= $75

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