Refer to Cornerstone Exercise 2.1. For next year, Pietro predicts that 50,000 units will be produced, with the following total costs:
Direct materials ..... ?
Direct labor .....$ 60,000
Variable overhead.. 25,000
Fixed overhead.. 220,000
Next year, Pietro expects to purchase $119,300 of direct materials. Projected beginning and ending inventories for direct materials and work in process are as follows:

Required:
1. Prepare a statement of cost of goods manufactured in good form.
2. What if the ending inventory of direct materials increased by $2,000? Which line items on the statement of cost of goods manufactured would be affected and in what direction (increase or decrease)?

Exercise 2.1

 

Direct Materials Work-in-Process Beginning Ending Inventory $5,600 4,900 Inventory S12,500 14,600