Question

Bowen Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. Its predetermined overhead rate includes $1,000,000 of fixed overhead in the numerator and 50,000 direct labor-hours in the denominator. The company purchased (with cash) and used 53,000 yards of raw materials at a cost of $11.40 per yard. Its direct laborers worked 20,800 hours and were paid a total of $291,600. The company started and completed 9,700 units of finished goods during the period. Bowen's standard cost card for its only product is as follows: (1) Inputs Direct materials Direct labor Fixed manufacturing overhead Total standard cost per unit Standard Quantity or Hours 4.6 yards 4.0 hours 4.0 hours (2) Standard Price or Rate $18.00 per yard $14.00 per hour $20.00 per hour Standard Cost (1) (2) S 82.80 56.ee 30.De $218.80 Required: 1. When recording the raw material purchases a. The Raw Materials inventory will increase (decrease) by how much? b. The Cash will increase (decrease) by how much? 2. When recording the raw materials used in production a. The Raw Materials inventory will increase (decrease) by how much? b. The Work in Process inventory will increase (decrease) by how much? 3. When recording the direct labor costs added to production a. The Work in Process inventory will increase (decrease) by how much? b. The Cash will increase (decrease) by how much? 4. When applying fixed manufacturing overhead to production, the Work in Process inventory will increase (decrease) by how much? 5. When transferring manufacturing costs from Work in Process to Finished Goods, the Finished Goods inventory will increase (decrease) by how much? 1a The raw materials will 1b The cash will The raw materials will 2a 2 The work in process Ja 3 The work in process wil The cash will The work in process w The finished goods will

Answer 1

For all the given requirements, we need to record the journal entries for the given transactions which are shown as follows:-

  Journal Entries (Amounts in $)

No	Account Titles and Explanations	Debit	Credit
1	Raw Materials Inventory (53,000 yards*$18 per yard)	954,000
	Materials Price Variance (954,000-604,200)		349,800
	Cash (53,000 yards*$11.40 per yard)		604,200
	(To record the raw material purchased)
2	Work in Process Inventory (9,700 units*4.6 yards*$18)	803,160
	Materials Quantity Variance (954,000-803,160)	150,840
	Raw Materials Inventory (53,000 yards*$18 per yard)		954,000
	(To record the issue of material to production)
3	Work in Process Inventory (9,700*4 hrs*$14)	543,200
	Labor Rate Variance [(20,800*14) - $291,600]	400
	Labor Efficiency Variance [(38,800 - 20,800)*$14]		252,000
	Cash		291,600
	(To record the direct labor cost)
4	Work in Process Inventory (20,800 hrs*$20 per hour)	416,000
	Manufacturing Overhead		416,000
	(To record the fixed overhead applied)
5	Finished goods Inventory	1,762,360
	Work in Process Inventory (803,160+543,200+416,000)		1,762,360
	(To record the transfer of costs to finished goods)

1) a) The raw materials inventory will increase by $954,000 (Actual Quantity*Standard Price).

b) Cash will decrease by $604,200 (Actual Quantity*Actual Price).

2) a) Raw materials inventory will decrease by $954,000.

b) Work in process inventory will increase by $803,160 (Standard Qty*Standard Price).

3) a) Work in process inventory will increase by $543,200 (Std Hours*Standard Rate).

b) Cash will decrease by $291,600 (Actual Labor Cost).

4) Work in process inventory will increase by $416,000 (Actual hours*Predetermined overhead rate)

5) The total amount debited to work in process inventory for materials, labor and overhead will be transferred to finished goods inventory account.

Therefore finished goods inventory will increase by $1,762,360.