Bama Company showed the following balances in its inventory accounts as of January 1, 2004:

The following transactions took place during 2004:

1. Manufacturing overhead costs of \(\$ 96,000\) were incurred and placed into work-inprocess.

2. Raw material purchases totaled \(\$ 34,000\).

3. Direct labor charges in the amount of \(\$ 119,000\) were paid.

4. The cost of goods sold was determined to be \(\$ 225,000\).

5. Raw materials in the amount of \(\$ 34,000\) were placed into production.

6. The ending finished goods inventory balance was \(\$ 14,000\).

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A. Prepare a schedule that shows the raw materials, work-in-process, finished goods, and cost of goods sold accounts. Determine the year-end balance for each account.

B. A variety of individuals may find these balances useful. For example, bank loan officers, production managers, and sales managers may make decisions using comparative account balances. 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 or slightly declining sales for the coming year, what recommendations might you make to the company about managing inventory levels?

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Raw materials inventory Work-in-process inventory Finished goods inventory $10,000 20,000 10,000