Question

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 Inventories Raw materials $ 29,000 $ 38,000 Work in process 9,600 18,800 Finished goods 65,000 33,600 Activities and information for May Raw materials purchases (paid with cash) 190,000 Factory payroll (paid with cash) 300,000 Factory overhead Indirect materials 17,000 Indirect labor 69,000 Other overhead costs 97,500 Sales (received in cash) 1,700,000 Predetermined overhead rate based on direct labor cost 55 % Compute the following amounts for the month of May using T-accounts. Cost of direct materials used. Cost of direct labor used. Cost of goods manufactured. Cost of goods sold.* Gross profit. Overapplied or underapplied overhead.

Answer 1

Solution:

PRODUCTION ACCOUNT

Particulars	Amount(in $)	Particulars	Amount(in $)
To Opening Stock of Raw Materials	29000	By Closing Stock of Raw Materials	38000
To Purchases of Raw Materials	190000	By Cost of Raw Materials Consumed c/d	181000
	219000		219000
To Cost of Raw Materials Consumed b/d	181000	By Prime Cost c/d	481000
To Factory Payroll	300000
	481000		481000
To Prime Cost b/d	481000	By Closing W.I.P	18800
To Opening W.I.P	9600	By Factory Cost c/d	557800
To Indirect Material Cost	17000
To Indirect Labor Cost	69000
	576600		576600
To Factory Cost b/d	557800	By Closing stock of Finished Goods	33600
To Opening stock of Finished goods	65000	By Cost of Production of Goods Sold c/d	589200
	622800		622800
To Cost of Production of Goods sold b/d	589200	By Cost of Sales c/d	686700
To Other Overheads cost	97500
	686700		686700
To cost of Sales b/d	686700	By Sales	1700000
To Profit	1013300

2). Gross Profit= Net Profit+ Indirect Expenses

= 1013300+17000+69000+97500= $ 1196800

3).Factory overheads are over absorbed by $ 18500