Question

Required information

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]

Pro-Weave manufactures stadium blankets by passing the products through a weaving department and a sewing department. The following information is available regarding its June inventories:

	Beginning Inventory			Ending Inventory
Raw materials inventory	$	120,000		$	185,000
Work in process inventory—Weaving		300,000			330,000
Work in process inventory—Sewing		570,000			700,000
Finished goods inventory		1,266,000			1,206,000

The following additional information describes the company’s manufacturing activities for June:

Raw materials purchases (on credit)	$	500,000
Factory payroll cost (paid in cash)		3,060,000
Other factory overhead cost (Other Accounts credited)		156,000
Materials used
Direct—Weaving	$	240,000
Direct—Sewing		75,000
Indirect		120,000
Labor used
Direct—Weaving	$	1,200,000
Direct—Sewing		360,000
Indirect		1,500,000
Overhead rates as a percent of direct labor
Weaving		80	%
Sewing		150	%
Sales (on credit)	$	4,000,000

Exercise 03-14 Production cost flow and measurement; journal entries LO P4

1. Compute the (a) cost of products transferred from weaving to sewing, (b) cost of products transferred from sewing to finished goods, and (c) cost of goods sold.
2. Prepare journal entries dated June 30 to record (a) goods transferred from weaving to sewing, (b) goods transferred from sewing to finished goods, (c) sale of finished goods, and (d) cost of goods sold.

Answer 1

In this question, we have to compute

(a) Cost of products transferred from weaving to sewing,

(b) Cost of products transferred from sewing to finished goods,

(c) Cost of goods sold.

First of all, we have to understand how to calculate cost of goods manufactured, a company need to determine the total manufacturing cost. Total manufacturing cost include:- direct materials used in production, direct labor and manufacturing overhead. Then we have to add Beginning Work in Process inventory and we have to deduct Ending Work in Process inventory. After that we will find Cost of Goods Manufactured.

Required:- 1 (a) Cost of products transferred from weaving to sewing

Solution:- Cost of Goods Manufactured in Weaving Department.

Material Used - Weaving	$ 240,000
Direct Labor - Weaving	$ 1,200,000
Manufacturing Overhead (Working Note)	$ 960,000
Total Manufacturing Costs	$ 2,400,000
Add: Beginning Work in Process	$ 300,000
Less: Ending Work in Process	$ (330,000)
Cost of Goods Manufactured	$ 2,370,000

Cost of Goods Transferred from Weaving to Sewing = $ 2,370,000

Working Note:-

Manufacturing overhead is 80% of Direct Labor i.e. $1,200,000 * 80% = $ 960,000

Now, we have to proceed with next part.

Required:- 1 (b) Cost of products transferred from sewing to finished goods.

Solution:- Cost of Goods Manufactured in Sewing Department.

Material Used - Sewing	$ 75,000
Direct Labor - Sewing	$ 360,000
Manufacturing Overhead (Working Note)	$ 540,000
Cost of Goods transferred from Weaving Department	$ 2,370,000
Total manufacturing Costs	$ 3,345,000
Add: Beginning Work in Process	$ 570,000
Less: Ending Work in Process	$ (700,000)
Cost of Goods Manufactured	$ 3,215,000

Cost of Goods Transferred from Sewing to Finished Goods = $ 3,215,000

Working Note:-

Manufacturing overhead is 150 % of Direct Labor i.e $ 360,000 * 150% = $ 540,000

Now, we have to proceed with next part.

Required:- 1 (c) Cost of goods sold.

Cost of Goods Manufactured	$ 3,215,000
Add: Beginning Finished Goods	$ 1,266,000
Goods Available for Sale	$ 4,481,000
Less: Ending Finished Goods	$(1,206,000)
Cost of Goods Sold	$ 3,275,000

Cost of Goods Sold = $ 3,275,000

Now, we have to proceed with the second requirement of the question.

2. Prepare journal entries dated June 30 to record

(a) goods transferred from weaving to sewing,

(b) goods transferred from sewing to finished goods,

(c) sale of finished goods, and

(d) cost of goods sold.

Journal Entries

Date	General Journal	Debit	Credit
June 30	(a) Work in Process Inventory - Sewing	$ 2,370,000
	Work in Process Inventory - Weaving		$ 2,370,000
June 30	(b) Finished Goods Inventory	$ 3,215,000
	Work in Process Inventory- Sewing		$ 3,215,000
June 30	(c) Account Receivable A/c	$ 4,000,000
	Sales Revenue A/c		$ 4,000,000
June 30	(d) Cost of Goods Sold	$ 3,275,000
	Finished Goods Inventory		$3,275,000

All these amounts are computed above in Part 1. Sale Revenue amount is already given in the question.

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Thank you.

Have a Nice Day Ahead.