Question

Old Tyme Soda produces one flavor of a popular local soft drink. It had no work-in-process on October 31 in its only inventory account During November, Old Tyme started 11,900 barrels. Work-in-process on November 30 is 2,150 barrels. The production supervisor estimates that the ending work-in-process inventory is 30 percent complete. An examination of Old Tyme's accounting records shows direct material costs of $26,233 and conversion costs of $29.900 for November. All production is sold as it is produced. Required: a. Compute cost of goods sold for November b. What is the value of work-in-process inventory on November 30? c. The president tells the controller that stock analysts expect higher income for the month and asks the controller to change the production manager's estimate about the ending work-in-process inventory (1) If the controller wanted to comply with the president's request, would he raise or lower the estimated percentage complete from the 30 percent estimate of the production supervisor? (2) What should the controller do? Complete this question by entering your answers in the tabs below. Reg A Rog B ReqC1 Reg C2 Compute cost of goods sold for November. (Do not round intermediate calculations.) Cost of goods sold Rega Reg B >

Answer 1

$ Old Tyme Soda Direct material cost Conversion cost Total cost 26,233.00 29,900.00 56,133.00 $ 11900 Units for which production started in November Wip Units sold Equivalent units produced 2150 9750 10395 1a) 1b) Cost of goods sold $ 52,650.00 Value of Wip $ 3,483.00 In order to generate higher income, the controller should raise the estimated percentage of completion on the ending work-in- process inventory, as it would result into the lowering of cost of goods sold, and thereby, leading to increase in profits. 1c)

1 Old Tyme Soda Direct material cost Conversion cost Total cost 26233 29900 =SUM(C2:03) Units for which production started in November Wip Units sold Equivalent units produced 11900 2150 =C6-C7 = (C7*0.3)+C8 Cost of goods sold Value of Wip =C8*04/09 =C7*0.3*04/09 In order to generate higher income, the controller should raise the estimated percentage of completion on the ending work-in-process inventory, as it would result into the lowering of cost of goods sold, and thereby, leading to increase in profits.