Question

Answer the last 4 questions. Thank You

Big Bang Inc. produces custom model kits and uses normal costing in its job-costing system.  Selected financial information for the year just ended is as follows:

Raw Materials Control			Finished Goods Control
Beg.Bal.       $ 4,000	14,000		Beg.Bal.     $ 10,000	60,000
13,000			70,000
End.Bal.    $3,000			End.Bal.     $ 20,000

Work-in-Process Control
Beg.Bal.          $ 8,000
Direct labour   28,000

Other Information:

• Actual manufacturing overhead was $42,000 for the year.
• The direct labour hourly wage was $16 per hour.
• Manufacturing overhead was allocated using an allocation rate of $20 per Direct Labour Hour.
• Indirect materials used during the year amounted to $2,000.

Required:

1. What was the amount of raw material purchased during the year?
2. What was the amount of direct material issued to production (used in manufacturing) during the year?
3. What was the amount of manufacturing overhead allocated to jobs during the year?
4. What was the total cost of jobs completed (Cost of Goods Manufactured) during the year?
5. What was the balance of Work in Process control at the end of the year (before disposition of over- or under allocated overhead)?
6. What was the amount of over- or under-allocated overhead for the year?
7. What was the cost of goods sold for the year (before disposition of over- or under allocated overhead)?
8. Dispose of the over- or under-allocated overhead using the following:
   1. Write off to Cost of Goods Sold
   2. Proration based on ending balances (before proration) in Work-In-Process, Finished Goods Control and Cost of Goods Sold.
1. Which method in requirement h) do you recommend? Why?

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

D E F G ДА Answer 2 Part 1) 3 The amount of raw material purchased during the year = $ 13000 5 Explanation 5 This amoount has been concluded from the debit side of the raw material inventory account 3 Part 2) The amount of raw material sued in production during the year = $ 14000 1 Explanation 2 The amount used for direct raw material has been concluded from the credit side of the raw material inventory account 4 Part 3) 5 The amount of overheads applied $ 35000 7 Calculation 8 Overheads applied 9 = No. of direct labour hours *Manufacturing overhead rate C0 = (28000/16) * 20 1 = $ 35000

23 Part 4) 24 Cost of goods manufactured = $ 70000 26 Thus can be concluded from the debit side of finished goods inventory 28 Part 5) 29 The cost of ending inventory of work in process = $ 14000 30 31 ending work in process = beginning work in process + direct material + direct labour + overheads applied - cost of goods manufactured 32 = 8000 + 13000 + 28000 + 35000 - 70000 33 = $ 14000 34 35 Part 6) 36 The amount of underapplied overheads = $ 7000 37 38 Underapplied overheads = actual overheads -overheads applied 39 = 42000 - 35000 40 = $ 7000 41

2 Part 7) 3 The cost of goods sold = $ 60000 5 This can be concluded from the credit side of the cost of goods sold = $ 60000 7 Part 8) 3 Dispose of to cost of goods sold 9 Sr. No. Account Title 1 Cost of goods sold | Manufacturing overheads Debit Credit 7000 0 7000 N 3 Sr. No. Debit my i Account Title 2 Cost of goods sold (60000/94000*7000) Finished goods control (20000/94000*7000) Work in process (14000/94000*7000) | Manufacturing overheads Credit 4468 1489 1043 7000 90 9 Part 9) I would recommend cost of goods sold method, that is all the unabsorbed overheads should be expenses to cost of goods sold as these are above the standard requirement.