Question

Drew Corp. designs and manufactures mascot uniforms for high school, college, and professional sports teams. Since each team's uniform is unique in color and design, Drew uses a job order costing system. On January 1, the T-accounts for some of Drew's primary balance sheet accounts were as follows: Raw Materials Inventory 15,000 Work in Process Inventory 31,000 Beg. Beg. Accounts Receivable 56,000 Accounts Payable Beg. Beg. 42,000 Finished Goods 22,000 Cash 32,000 Beg. Beg. During the year, the following events occurred: 1. Drew purchased raw materials costing $86,000 on account. 2. Drew used $93,000 of raw materials in production. Of these, 70% were classified as direct materials and 30% as indirect materials. (Drew maintains a single Raw Materials Inventory account.) 3. Drew used 31,200 hours of direct labor. The company's average direct labor rate was $7.5 per hour (credit Wages Payable). 4. The company's only indirect labor cost was the salary of a security guard hired to watch the company's shop after hours. The guard's annual salary was $25,000 (credit Wages Payable). 5. Other manufacturing overhead costs the company incurred on account totaled $70,000. 6. Drew applied $130,000 in manufacturing overhead. 7. The company completed production of goods costing $326,000. 8. The company's Cost of Goods Sold balance was $303,750 before adjusting for over- or underapplied overhead.

Answer 1

Raw Materials
Beg.	15,000	2.	93,000
1.	86,000
End.	8,000
Work in Process
Beg.	31,000	7.	326,000
2.	65,100
3.	234,000
6.	130,000
End.	134,100
Finished Goods
Beg.	22,000	8.	303,750
7.	326,000
End.	44,250
Cost of Goods Sold
8.	303,750

c.

	Adjusted Balance
Work in Process	$ 132,125
Finished Goods	43,598
Cost of Goods Sold	299,277

Ratio for adjustment: 134,100 : 44,250 : 303,750

Adjusted balances:

Work in process = 134,100 - ( 134,100 / 482,100 ) * 7,100 = 132,125

Finished goods = 44,250 - ( 44,250 / 482,100 ) * 7,100 = 43,598

Cost of goods sold = 303,750 - ( 303,750 / 482,100 ) * 7,100 = 299,277