Explore BrainMass

Cost flows in an accounting system

Bama company showed the following balance in its inventory accounts as of Jan 1, 2004:
raw materials inventory $10,000
work - in - process inventory $ 20,000
finished goods inventory $10,000

The following transaction took place during 2004:
1. manufacturing overhead cost of $96,000 were incurred and placed into work in process
2. raw material purchase total $34,000
3. direct labor charges in the amount of $119,000 were paid
4. the cost of good sold was determined to be $ 225,000
5. raw materials in the amount of $ 34,000 were place into production
6. the ending finish goods inventory balance was $14,000

A. prepare the schedule - show all accounts

B. A variety of individuals may find these balances useful. For example, bank loan officers, productions managers, and sales managers may make decisions using comparative account balance. Describe how each of these individuals might use the data.

C. What trends do you observe in the raw materials, work in process, and finished goods inventory accounts?

D. If the marketing department forecasts flat of slightly declining sales for the coming year, what recommendations might you make to the company about managing inventory levels?

Solution Summary

The expert examines cash flows in an accounting systems.