Question

Required information (The following information applies to the questions displayed below.) Sierra Company manufactures soccer balls in two sequential processes: Cutting and Stitching. All direct materials enter production at the beginning of the Cutting process. The following information is available regarding its May inventories: Raw materials inventory Work in process inventory-Cutting Work in process inventory-Stitching Finished goods inventory Beginning Inventory $16,000 63,500 83,300 24,100 Ending Inventory $17,950 70,500 66,700 12,250 The following additional information describes the company's production activities for May. Direct materials Raw materials purchased on credit Direct materials used-Cutting Direct materials used-Stitching $ 35,000 22,250 Direct labor Direct labor-Cutting Direct labor-Stitching Total factory payroll paid (in cash) $ 16,600 66,400 138,400 Factory Overhead (Actual costs) Indirect materials used Indirect labor used Other overhead costs $ 10,800 55,400 49,000 Factory Overhead Rates Cutting (150% of direct materials used) Stitching (120% of direct labor used) Sales $336,000 Required: 1. Compute the amount of (a) production costs transferred from Cutting to Stitching, (b) production costs transferred from Stitching to finished goods, and (c) cost of goods sold.

Answer 1

Answer-1:

1(a)	Production cost transferred from Cutting to Stitching	$     65,225
1(b)	Production cost transferred from Stitching to Finished Goods	227,905
1(c)	Cost of goods sold	239,755

$ $ 22,250 $ 65,225 RM-April 30 RM-Purchase Raw Material (RM) 16,000 WIP-Cutting 35,000 WIP-Stitching Factory overhead 51,000 17,950 WIP-April 30 Direct material-Cutting Direct labor-Cutting Factory overhead 10,800 51,000 RM-May 31 135,725 Work In Process (WIP) - Cutting $ 63,500 WIP-Stitching 22,250 16,600 33,375 135,725 70,500 Factory Wages Payable $ 138,400 Direct labor-Cutting Direct labor-Stitching Indirect labor 138,400 WIP-May 31 $ 227,905 Cash $ 16,600 66,400 55,400 138,400 294,605 Work In Process (WIP) - Stitching WIP-April 30 $ 83,300 FG Direct material-Stitching Direct labor-Stitching 66,400 WIP-Cutting 65,225 Factory overhead 79,680 294,605 WIP-May 31 66700 Factory Overhead Indirect RM used $ 10,800 WIP-Cutting Indirect labor used 55,400 WIP-Stitching Other overhead costs 49,000 Underapplied overhead $ 115,200 Underapplied overhead 2,145 $ $ 239,755 33,375 79,680 FG-April 30 WIP-Stitching Finished Goods (FG) 24,100 Cost of goods sold 227,905 252,005 12,250 252,005 115,200 FG-May 31

Answer-2:

	Date	General Journal	Debit	Credit
1	May 31.	Raw material inventory	$     35,000
		Account payable		$     35,000
2	May 31.	WIP-Cutting	22,250
		Raw material inventory		22,250
3	May 31.	Factory overhead	10,800
		Raw material inventory		10,800
4	May 31.	WIP-Cutting	16,600
		WIP-Stitching	66,400
		Factory wages payable		83,000
5	May 31.	Factory overhead	55,400
		Factory wages payable		55,400
6	May 31.	Factory wages payable	138,400
		Cash		138,400
7	May 31.	Factory overhead	49,000
		Account payable		49,000
8	May 31.	WIP-Cutting	33,375
		WIP-Stitching	79,680
		Factory overhead		113,055
9	May 31.	WIP-Stitching	65,225
		WIP-Cutting		65,225
10	May 31.	FG inventory	227,905
		WIP-Stitching		227,905
11	May 31.	Account receivable	336,000
		Sales		336,000
12	May 31.	Cost of goods sold	239,755
		FG inventory		239,755