Question

The Alpha Company makes specialty computers. To do so, it has the following information: RAW MATERIALS INVENTORY Beginning balance 10,000 USED 245,000 WORK IN PROCESS 35,000 TRANSFERRED FINISHED GOODS INVENTORY Beginning balance 30,000 COSTS OF GOODS MANUFACTURED COST OF GOODS SOLD COST OF GOODS SOLD Beginning balance PURCHASES 250,000 227,000 180,000 DIRECT MATERIALS DIRECT LABOR MOH APPLIED Ending balance Ending balance 15,000 37,000 Ending balance 23,000 Indirect materials Indirect labor Utilities Depreciation Taxes Other TOTAL MANUFACTURING OVERHEAD 8.000 MOH APPLIED 100,000 12,000 25,000 1,500 35,000 181,500 Salaries & Wages Payable 335,000 Beginning balance DIRECTLABOR INDIRECT LABOR OTHER Ending balance 5,000 180.000 100,000 50,000 Alpha pays its plant workers on average $20 an hours. The predetermined overhead rate to apply MOH is $22.50 per direct labor hours. 10 Z each REQUIRED: 1. COMPLETE THE MISSING AMOUNTIN: RAW MATERIALS FOR PURCHASES MOH FOR AMOUNT APPLIED WORK IN PROCESS KOH MOH APPLIED AND AMOUNT TRANSFERRED FINISHED GOODS COST OF GOODS SOLD

Answer 1

1.

Number of direct labor hours = Direct labor cost/Direct labor rate per hour = $180000/$20 = 9000

MOH for amount applied = Direct labor hours x Predetermined overhead rate = 9000 x $22.50 = $202500

Work in process for MOH applied: $202500

Work in process for amount transferred = $35000 + 237000 + 180000 + 202500 - 37000 = $617500

Finished goods cost of goods manufactured = $617500

Cost of goods sold = $30000 + 617500 - 23000 = $624500

2. Manufacturing overhead overapplied = $202500 - $181500 = $21000

Account	Debit	Credit
Manufacturing overhead	21000
Cost of goods sold		21000

3. Adjusted cost of goods sold = $624500 - $21000 = $603500

(1) Gross profit = $603500 x 20/80 = $150875

(2) Sales revenue = $603500/80% = $754375

4.

Cost of Goods Manufactured Schedule
Beginning raw materials $	10000
Add: Raw material purchases	250000
Raw materials available for use	260000
Less: Ending raw materials	15000
Raw materials used	245000
Less: Indirect raw materials	8000
Direct materials used		237000
Direct labor		180000
Manufacturing overhead applied		202500
Total current manufacturing costs		619500
Add: Beginning work in process		35000
Total cost of work in process		654500
Less: Ending work in process		37000
Cost of goods manufactured $		617500

Adjusted Cost of Goods Sold Schedule
Cost of goods manufactured $	617500
Add: Beginning finished goods	30000
Cost of goods available for sale	647500
Less: Ending finished goods	23000
Unadjusted Cost of goods sold $	624500
Less: Overapplied manufacturing overheads	21000
Adjusted Cost of goods sold $	603500

5.

Income Statement
Sales revenue	754375
Cost of goods sold	603500
Gross profit	150875
Selling, general and administrative expense	125000
Net income	25875