Question

Question 4 (13 marks) Coral Artworks Ltd has supplied the following information to its new management accountant for the month of March: Account Beginning Balances Ending Balances Raw Materials $21,000 $36,000 WIP $25,000 $53,600 Finished Goods $30,000 $64,000 1. Overhead is applied on the basis of $6 per direct labour hour (16,000 DL hours incurred). 2. Jobs sold during the period were sold for $500,000. The cost of goods sold during the month was $300,000. 3. Indirect materials worth $6,500 were issued to production during the month. Direct materials were purchased on credit. 4. Regular hourly rate is $10. A total of 7,500 labour hours were worked during normal working hours. Employees also worked an additional 500 hours of overtime during the month. Overtime is paid at a rate of 150% of the normal hourly rate. 5. Sundry manufacturing overhead costs incurred during the month were $75,000. Required: Complete the relevant T-accounts (provided on the next page) to show the flow of costs through the company's manufacturing accounts. (8 marks) 17

Answer 1

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Work in Process inventory					Cost of Goods Sold
Debit		Debit			Debit		Debit
Beginning Balance	$       25,000	Finished Goods	$   3,34,000		Finished Goods	$   3,00,000	Overhead overapplied	$       12,000
Applied Overhead	$       96,000	From Finished goods
Direct Labor (8000 Hours*$10)	$       80,000
Direc Material	$   1,86,600
		Ending Balance	$       53,600		Ending Balance	$   2,88,000
Raw Material Inventory					Manufacturing Overhead
Debit		Debit			Debit		Debit
Beginning Balance	$       21,000	Indirect Material	$         6,500		Indirect Material	$         6,500	Applied Overhead	$       96,000
Purchase of Material	$   2,08,100	Direct Material	$   1,86,600		Sundry	$       75,000
					Indirect Labor (500*$5)	$         2,500
		Ending Balance	$       36,000		Cost of Goods Sold	$       12,000
Finished Goods inventory					Sales
Debit		Debit			Debit		Debit
Beginning Balance	$       30,000	Cost of Goods Sold	$   3,00,000				Cash Sale	$   5,00,000
Work in Process Inventory	$   3,34,000
(balancing)
		Ending Balance	$       64,000
1. Cost of Goods Manufactured			$   3,34,000
ii. Raw Material issued		$6,500+$186,600	$   1,93,100
iii. Raw Material Purchased			$   2,08,100
iv. Cost of goods sold balance			$   2,88,000
v. Overhead application		Overapplied b y	$       12,000