Reference no: EM132479919

Chop Shop Manufacturing Company makes specialty tools. In July, Chop Shop incurred manufacturing costs of $4,000,000 for direct materials, direct labour, and overhead. 30% of the total costs represents overhead applied. The overhead rate is $1 for every $0.50 of direct labour costs incurred. Inventory balances were:

                                                             July 1       July 31

Raw materials...................................... .. $100,000 $ 80,000

Work in process.................................. ......... 90,000 95,000

Finished goods.................................... ..... 120,000 130,000

Instructions

Question a) Determine the cost of raw materials purchased in July.

Question b) Prepare a cost of goods manufactured schedule for July 2016.

Question c) Where does the cost you calculated in part b appear in the financial statements at year-end? Explain.