Question

Use the following information to answer questions (The following information applies to the questions displayed below.) The following information is available for Lock-Tite Company, which produces special-order security products and uses a Job order costing system. April 30 May 31 $ $43,000 10,200 63,000 52,000 21,300 35,600 Inventories Raw materials Work in process Finished goods Activities and information for May Raw materials purchases (paid with cash) Factory payroll (paid with cash) Factory overhead Indirect materials Indirect labor Other overhead costs Sales (received in cash) Predetermined overhead rate based on direct labor cost 210,000 345,000 15,000 80,000 120,000 1,400,000 78% Exercise 15-7 Cost flows in a job order costing system LO P1, P2, P3, P4 Compute the following amounts for the month of May using T-accounts. 1. Cost of direct materials used. 2. Cost of direct labor used. 3. Cost of goods manufactured. 4. Cost of goods sold." 5. Gross profit 6. Overapplied or underapplied overhead. "Do not consider any underapplied or overapplied overhead.

Answer 1

Raw Materials (RM)					Work in Process (WIP)
April 30	$43000	15000	Indirect materials		April 30	$10200	625400	Cost of goods manufactured
RM purchases	210000	186000	DM used		DM used	186000
					DL used	265000
					Manufacturing overhead applied	185500
May 31	$52000				May 31	21300
Finished Goods (FG)					Factory Overhead
April 30	$63000	652800	Cost of goods sold		Indirect materials	$15000	185500	Manufacturing overhead applied
Cost of goods manufactured	625400				Indirect labor	80000
					Other overhead costs	120000
May 31	35600				Underapplied overhead	$29500

Cost of Direct materials used= April 30+RM purchases-Indirect materials-May 31

= $43000+210000-15000-52000= $186000

Cost of direct labor used= Factory payroll (paid with cash)-Indirect labor

= $345000-80000= $265000

Manufacturing overhead applied= $265000*70%= $185500

Cost of goods manufactured= April 30+DM used+DL used+Manufacturing overhead applied-May 31

= $10200+186000+265000+185500-21300= $625400

Cost of goods sold= April 30+Cost of goods manufactured-May 31

= $63000+625400-35600= $652800

Overapplied or underapplied overhead= Manufacturing overhead applied-Actual manufacturing costs

= $185500-15000-80000-120000= $29500 underapplied

Income Statement (Partial)
Sales	$1400000
Less: Cost of goods sold	-652800
Gross profit	$747200