Question

McQueen Motor Company manufactures automobiles. During September 2020, the company purchased 7,000 head lamps at a cost of $20 per lamp. 10 of these lamps were used to replace the head lamps in autos used by traveling sales staff, and 6,500 lamps were put in autos manufactured during the month.

Of the autos put into production during September 2020, 80% were completed and transferred to the company’s storage lot. Of the cars completed during the month, 80% were sold by September 30.

(a)

Determine the cost of head lamps that would appear in each of the following accounts at September 30, 2020: Raw Materials, Work in Process, Finished Goods, Cost of Goods Sold, and Selling Expenses.

Raw Materials		$
Work in Process		$
Finished Goods		$
Cost of Goods Sold		$
Selling Expenses		$

Answer 1

Solution

Name of account
Raw material	$         9,800.00
Work in process	$       26,000.00
Finished goods	$       20,800.00
Cost of goods sold	$       83,200.00
Selling expenses	$             200.00

Working

		Raw material	Work in process	Finished goods	Cost of goods sold	Selling expenses
Head lamps purchased		7000
Transferred to production and sales department		-6510	6500			10
Balance		490	6500	0	0	10
Transferred to finished goods			-5200	5200
Balance		490	1300	5200	0	10
Transferred to cost of goods sold				-4160	4160
Final Balance		490	1300	1040	4160	10
Cost per head lamp		$               20.00	$          20.00	$               20.00	$                 20.00	$          20.00
Total cost assigned		$         9,800.00	$ 26,000.00	$      20,800.00	$         83,200.00	$        200.00