Cost of Goods Manufactured and Sold Torid Manufacturing Company produces heating equipment that is used by other companies in their manufacturing operations.

Torid’s accounting department provided the following cost information for 2001:

Payroll records showed that labor costs related to manufacturing were $430,000 in 2001. Raw materials in the amount of $850,000 and supplies totaling $140,000 were purchased during the year. Other manufacturing costs totaled $125,000 for the year.

a. Why are labor and supplies costs included along with the cost of raw materials in computing the cost of finished goods inventory produced during the period?

b. Determine the amount reported as cost of goods sold for 2001.

c. How can information on raw materials and work-inprocess inventories assist in your evaluation of the operations of Torid Manufacturing for 2001? What factors might be associated with a significant increase in the raw materials inventory?

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Inventory Type Finished goods Work-in-process Raw materials Jan. 1, 2001 Inventory Balances Dec. 31, 2001 $310,000 $490,000 280,000 70,000 320,000 285,000 Production supplies 75,000 30,000 Total $985,000 $875,000