LIVING AS KAI’S 11

COST ACCOUNTANT
Kim Kai Corporation is in the business of manufacturing high-end Teddy
Bears. He has incurred the following costs for the month of September
2022:

• direct labor, P2,500,000;

• direct materials purchases, P2,500,000; purchase returns of P750,000;
and purchase discounts of P250,000.

In addition, the following costs were incurred in during the same month: Other information:

Inventories were costed as follows:

• Monthly rent, P1,000,000; 75% of the rented building is associated to
2022
production.
September 1 September 30
• Advertising expense, P200,000. Finished goods P250,000 P300,000
• Monthly salary of the Production Managers, Mark Lee and Ten Lee, Work in process 450,000 550,000
P80,000 per manager. Materials 75,000 125,000
• Electricity and Utilities, P2,000,000; 20% of which pertains to the selling
and administration. Required:
• Monthly insurance on the production facility, P1,000,000.
Prepare the (1) Schedule of Direct Materials Used, (2) Schedule of
• Other expenses, P700,000, to which 70% is indirectly attributable to the
Work in Process, (3) Cost of Goods Manufactured, and (4) Cost of
teddy bears.
Goods Manufactured and Sold
Cost of Goods Manufactured and Cost of Goods Sold 12

SCHEDULE OF DIRECT MATERIALS USED

Materials Inventory, beginning 75,000.00

Add: Net Purchases of Materials

Purchases 2,500,000.00

Less: Purchase Discounts (750,000.00)

Less: Purchase Returns and Allowances (250,000.00) 1,500,000.00

Materials Available for Use 1,575,000.00

Less: Materials Inventory, ending (125,000.00)

Direct Materials Used 1,450,000.00

Cost of Goods Manufactured and Cost of Goods Sold 13

SCHEDULE OF WORK IN PROCESS

Work in Process Inventory, beginning 450,000.00
Add: Manufacturing Costs for the period
Direct Materials Used 1,450,000.00
Direct Labor 2,500,000.00
Applied Factory Overhead
Rent Expense 750,000.00
Indirect Labor 160,000.00
Electricity and Utilities 1,600,000.00
Factory Insurance 1,000,000.00
Other Expenses 490,000.00 4,000,000.00 7,950,000.00
Total Manufacturing Costs 8,400,000.00
Less: Work in Process Inventory, ending (550,000.00)
Cost of Goods Manufactured 7,850,000.00
Cost of Goods Manufactured and Cost of Goods Sold 14

COST OF GOODS MANUFACTURED

Direct Materials Used:
Materials Inventory, beginning 75,000.00
Add: Net Purchases of Materials
Purchases 2,500,000.00
Less: Purchase Discounts (750,000.00)
Less: Purchase Returns and Allowances (250,000.00) 1,500,000.00
Materials Available for Use 1,575,000.00
Less: Materials Inventory, ending (125,000.00) 1,450,000.00
Direct Labor 2,500,000.00
Applied Factory Overhead
Rent Expense 750,000.00
Indirect Labor 160,000.00
Electricity and Utilities 1,600,000.00
Factory Insurance 1,000,000.00
Other Expenses 490,000.00 4,000,000.00
Total Manufacturing Costs for the period 7,950,000.00
Add: Work in Process Inventory, beginning 450,000.00
Less: Work in Process Inventory, ending (550,000.00)
Cost of Goods Manufactured 7,850,000.00
Cost of Goods Manufactured and Cost of Goods Sold 15

COST OF GOODS MANUFACTURED AND SOLD

Direct Materials Used:
Materials Inventory, beginning 75,000.00
Add: Net Purchases of Materials
Purchases 2,500,000.00
Less: Purchase Discounts (750,000.00)
Less: Purchase Returns and Allowances (250,000.00) 1,500,000.00
Materials Available for Use 1,575,000.00
Less: Materials Inventory, ending (125,000.00) 1,450,000.00
Direct Labor 2,500,000.00
Applied Factory Overhead
Rent Expense 750,000.00
Indirect Labor 160,000.00
Electricity and Utilities 1,600,000.00
Factory Insurance 1,000,000.00
Other Expenses 490,000.00 4,000,000.00
Total Manufacturing Costs for the period 7,950,000.00
Add: Work in Process Inventory, beginning 450,000.00
Less: Work in Process Inventory, ending (550,000.00)
Cost of Goods Manufactured 7,850,000.00
Add: Finished Goods Inventory, beginning 250,000.00
Total Goods Available for Sale 8,100,000.00
Less: Finished Goods Inventory, ending (300,000.00)
Total Cost of Goods Sold 7,800,000.00