During the month of January, the James Manufacturing Company’s Raw The company follows a procedure of crediting a Purchase Discount Revenue account when purchase discounts are taken or lost. Terms of purchase are 2/10, n/30.

a. Analyze and adjust the Raw Materials account as necessary.

b. Describe briefly a general rule for determining what costs are to be considered as Cost of Material Purchases.

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Materials Purchased (gross price) Freight-in (including demurrage charges of $3,000) Receiving Department Costs Materials Handling and Storage Costs Allocation of Selling Department Costs Shipping Department Costs $400,000 12,000 20,000 8,000 7,000 3,000 $450,000