The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 5,960 batteries at a cost of $75 per battery. It withdrew 5,500 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company's traveling sales staff. The remaining 5,400 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90 percent were completed and transferred from work in process to finished goods. Of the cars completed during the month, 30 percent were unsold at April 30th.
Required:
1. Determine the cost of batteries that would appear in each of the following accounts on April 30th.
Number of batteries bought = 5,960
Number of batteries withdrawn from stores = 5,500
Cost per battery = $75
Raw materials inventory = Number of batteries bought - Number of batteries withdrawn from stores
= 5,960-5,500
= 460
1a.
Cot of raw materials = Raw materials inventory x Cost per battery
= 460 x 75
= $34,500
1b.
Number of batteries used in production = 5,400
Degree of completion = 90%
Work in process inventory = 10%
= Number of batteries used in production x Work in process inventory
= 5,400 x 10%
= 540 batteries
Cost of work in process = Work in process inventory x Cost per battery
= 540 x 75
= $40,500
1c.
Unsold quantity = 30%
Finished goods inventory = Number of batteries used in production x Degree of completion x Unsold quantity
= 5,400 x 90% x 30%
= 1,458 batteries
cost of finished goods = Finished goods inventory x Cost per battery
= 1,458 x 75
= $109,350
1d.
Number of batteries sold = Number of batteries used in production - Work in process inventory - Finished goods inventory
= 5,400-540-1,458
= 3,402
Cost of goods sold = Number of batteries sold x Cost per battery
= 3,402 x 75
= $255,150
1e.
Selling expense = Batteries used in travelling sales staff car x Cost per battery
= 100 x 75
= $7,500
Name of the Account | Cost | |
1a. | Raw Materials | $34,500 |
1b. | Work in Process | $40,500 |
1c. | Finished Goods | $109,350 |
1d. | Cost of Goods Sold | $255,150 |
1e. | Selling Expense | $7,500 |
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