Question

Cost of Materials Issuances Under the FIFO Method

An incomplete subsidiary ledger of materials inventory for May is as follows:

a. Complete the materials issuances and balances for the materials subsidiary ledger under FIFO.

Received				Issued				Balance
Receiving Report Number	Quantity	Unit Price		Materials Requisition Number	Quantity	Amount		Date	Quantity	Unit price	Amount
								May 1	280	$8	$2,240
25	200	$10						May 4
				100	320	$		May 10
31	130	12						May 21
				113	190			May 27

b. Determine the materials inventory balance at the end of May.
$

c. Journalize the summary entry to transfer materials to work in process.

d. Comparing   as reported in the materials ledger with predetermined order points would enable management to order materials before a(n)   causes idle time.

Financial Statements of a Manufacturing Firm

The following events took place for Chi-Lite Inc. during June, the first month of operations as a producer of road bikes:

•	Purchased $511,400 of materials.
•	Used $439,800 of direct materials in production.
•	Incurred $380,000 of direct labor wages.
•	Applied factory overhead at a rate of 75% of direct labor cost.
•	Transferred $1,060,600 of work in process to finished goods.
•	Sold goods with a cost of $1,017,700.
•	Sold goods for $1,821,700.
•	Incurred $437,600 of selling expenses.
•	Incurred $162,800 of administrative expenses.

a. Prepare the June income statement for Chi-Lite. Assume that Chi-Lite uses the perpetual inventory method.

Chi-Lite Inc.
Income Statement
For the Month Ended June 30
		$
		$
Selling and Administrative Expenses:
	$
Total Selling and Administrative Expenses
		$

b. Determine the inventory balances at the end of the first month of operations.

Materials inventory, June 30	$
Work in process inventory, June 30	$
Finished goods inventory, June 30	$

Answer 1

B. material balance at 31St May 100 Units @ 12/unit = $1,200

C.Summary Entry:

Date Particulars Dr. $ Cr. $

May 10 Work-in-process 2,640

Inventory 2,640

(Being Inventory issued 280 units

@ $8 and 40 units @$10)

May 27 Work-in-process 1,960

Inventory 1,960

(Being Inventory issued 160 units

@ $10 and 30 units @$12)

D.

It is confusing that the data given in point A above is related to the data of point D, Assuming Part D as a Separate question the solution will be as follows:

D(a)

June Income Statement of Ci-Lite:

Notes: Factory Expenses: 75% of Diect labour Cost = 75% x 380000 = $285,000

D(b)

Closing Inventory as on June 30:

Raw material:

Opening + Purchase - Issued = Closing Stock

0 + 511,400 - 439,800 = 71600

WIP:

Opening WIP + Raw materail Issued + Labour cost + Factory Cost - Transferred to F.P. = Closing WIP

0 + 439,800 + 380000 + 285,000 - 1,060,600 = $44,200

Finished Goods:

Opening F.P. + Transferred from WIP - Goods Sold = Closing F.P.

0 + 1,060,600 - 1,017,700 = $42,900