Question

The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 6,950 batteries at a cost of $125 per battery. It withdrew 6,400 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 The remaining 6,300 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90 percent were completec and transferred from work in process to finished goods. Of the cars completed during the month, 30 percent were unsold at April 30th Required . Determine the cost of batteries that would appear in each of the following accounts on April 30th. Name of the Account Cost 1a. Raw Materials 1b. Work in Process 1c. Finished Goods 1d. Cost of Goods Sold 1e. Selling Expense

Answer 1

Summary

Automobile Purchased	6,950
Cost Per unit	125
Automobile withdrawn from the storerooms	6400
Automobiles used in sales staff	100
Automobile used in production	6300
Completed and transferred to finished goods	90%
Unsold	30%

1.

Automobile Purchased	6,950
Less: withdrawn from the storerooms	6400
Automobile remaining in inventory	550
Cost Per Unit	125
Cost in raw mateials 550*125	68750

2. Work in Process

Automobiles used in production 6400 – 100	6300
Less: Completed and transferred to finished goods 90% * 6300 =	5670
Still in Work- in - Process	630
Cost per unit	125
Cost of work in process = 630 *125	78,750

3. Finished Goods

Completed and transferred to finished goods 90% * 6300 =	5670
Less: sold during the month 70%*6300	4410
Unsold in Finished goods	1260
Cost per unit	125
Cost of finished goods = 125 *1260	157,500

4. Cost of goods sold = Beginning inventory + Purchases – Ending Inventory

Purchases	6950
Less Ending inventory	1260
Cost of goods sold	5690
Cost of goods sold = 125 *5690	711,250

              

5. Selling Expense

sold during the month 70%*6300	4410
Cost per unit	125
4410 *125	551,250