Question

Required information Problem 15-1A Production costs computed and recorded; reports prepared LO C2, P1, P2, P3, P4 [The following information applies to the questions displayed below.) Marcelino Co.'s March 31 inventory of raw materials is $87,000. Raw materials purchases in April are $590,000, and factory payroll cost in April is $385,000. Overhead costs incurred in April are: indirect materials, $56,000; indirect labor, $28,000; factory rent, $31,000; factory utilities, $24,000, and factory equipment depreciation, $59,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $700,000 cash in April. Costs of the three jobs worked on in April follow. Job 306 Job 307 Job 308 $ 27,000 23,000 11,500 $ 38,000 18,000 9,000 Balances on March 31 Direct materials Direct labor Applied overhead Costs during April Direct materials Direct labor Applied overhead Status on April 30 132,000 102,000 220,000 154,000 $105,000 101,000 Finished (sold) Finished (unsold) In process

Answer 1

In this question, first of all we have to calculate the total of each production cost incurred for April and the total cost assigned to each job.

Here is our first step:

	Job 306	Job 307	Job 308	April Total
From March
Direct Material	27,000	38,000		65,000
Direct Labor	23,000	18,000		41,000
Applied Overhead	11,500	9,000		20,500
Beginning Goods in process	61,500	65,000	0	126,500
For April
Direct Material	132,000	220,000	105,000	457,000
Direct Labor	102,000	154,000	101,000	357,000
Applied Overhead (50% of Direct Labor)	51,000	77,000	50,500	178,500
Total Cost added in April	285,000	451,000	256,500	992,500
Total Cost (April 30)	346,500	516,000	256,500	1,119,000
Status on April 30	Sold	Unsold	In Process
April 30 Cost included in:	Cost of Goods Sold	Finished goods Inventory	Work in Process

As per the requirement of the question, there are some values Factory overhead is given in the question. and we have calculated Overhead applied to Jobs. The difference between these two overheads are Under Applied overhead or Over Applied overhead.

• Calculation of Under applied or over applied overhead.

Overhead applied to Jobs		178,500
Overhead incurred:
Indirect Material	56,000
Indirect Labor	28,000
Factory Rent	31,000
Factory Utilities	24,000
Factory Equipment Depreciation	59,000	198,000
Under applied overhead		19,500

This under applied overhead will be added to the cost of goods sold i.e. $19,500 because previously it is not added in the cost of goods sold.

Our first requirement is:

4.1 Compute Gross profit for April.

Sales (Given in the question)	$ 700,000
Less: Cost of Goods Sold (Working Note)	$ 366,000
Gross Profit	$ 334,000

Working Note:

Cost of goods sold (Job 306) + Under Applied overhead

346,500 + 19,500 = $366,000

# Our next requirement is:

4.2 How to present the inventories on April 30 Balance Sheet.

Raw Materials	$ 164,000
Work in Process (Calculated above in Job 8)	$ 256,500
Finished Goods (Calculated above in Job 7)	$ 516,000
Total Inventories	$ 936,500

Working Note:

Calculation of Raw Materials inventory

Beginning Raw Materials	$ 87,000
Purchases	$ 590,000
Direct Material Used	$(457,000)
Indirect Material used	$( 56,000)
Ending Raw Materials Inventory	$164,000

If you have any doubt in this problem, Please feel free to ask me.

Thank you..

Please have a review for this question.