Accounting Management: Cost Classification and Ethics

TASK 1: Cost Classification and Ethics
The Sorrel Pharmaceuticals Corporation manufactures a variety of drugs that are marketed internationally. Inventories on May 31 and June 30 were as follows: May 31 June 30
Materials Inventory $354,100 $327,400
Work in Process Inventory 112,600 116,400
Finished Goods Inventory 138,500 142,800
Purchases of materials for June were $142,600. Direct labor costs were incurred and computed on the basis of 27,000 hours at $8 per hour. Actual overhead costs incurred in June were as follows: operating supplies used, $5,700; janitorial and materials handling labor, $38,100; employee benefits $110,800; heat, light, and power, $50,000; factory depreciation, $8,400; property taxes, $8,000; and expired portion of insurance premiums, $12,000. Net sales for June were $992,700. Selling and administrative expenses were $165,000.
Prepare a statement of cost of goods manufactured for month ended June 30.
ANSWER:
A statement of cost of goods manufactured for month ended June 30 follows:
• Direct materials = Beginning raw materials inventory + raw materials in purchased – ending raw materials inventory = 354,100 + 142,600 – 327,400
 Direct materials: $169,300
• Direct labor: 27,000 x 8 = $216,000
• Manufacturing overhead:
 Operating supplies used = $ 5,700
 Janitorial and materials handing labor = $38,100
 Employee benefits = $11,800
 Heat, light and power = $50,000
 Factory depreciation = $8,400
 Property Taxes = $8,000
 Expired portion of insurance premiums = $12,000
 Manufacturing overhead: $233,000
• Total manufacturing costs = Direct materials + Direct labor + Manufacturing overhead = $169,300 + $216,000 + $ 233,000 = $ 618,300
• Cost of goods manufactured = Beginning work in process inventory + Total manufacturing costs – Ending work in process inventory = $ 112,600 + $ 618,300 + $ 116,400 = $ 614,500
TASK 2: Comparing