Question

Factory deprecatro D) Factory depreciation is a product cost and I sold 12) Costs are transferred from the balance sheet to the income statement as cost of goods sold when A) finished goods are sold B) direct materials, direct labor and manufacturing overhead are transferred to the beginning Work-In-Process Inventory account the total of Cost of Goods Manufactured is determined D) goods are transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account 13) Lakeshore Manufacturing provided the following information for the month ended March 31: Sales Revenue Besinning Finished Goods Inventory Ending Finished Goods Inventory Cost of Goods Manufactured $30,000 17,000 11,500 12,600 D) $17,400 $22,900 Compute gross profit. A) $11,900 B) $5900 14) Which of the following would use a process costing system rather than a job order costing system? A) a paint manufacturer B) a health-care service provider a home remodeling contracting company D) a music production studio 15) The accounts of Melissa Manufacturing showed the following balances at the beginning of December: Debit $55,000 81,000 Account Raw Materials Inventory Work-in-Process Inventory Finished Goods Inventory Manufacturing Overhead 17,000 The following transactions took place during the month: December 2: Issued direct materials $37,000 and indirect materials $4000 to production. December 15: Incurred $6000 and $5000 toward factory's direct labor cost and indirect labor cost, respectively. What should be the balance in the Work-in-Process Inventory following these transactions? A) $124,000 B) $86,000 $87,000 D) $75,000

Answer 1

Solution

Q12. Costs are transferred from the balance sheet to the income statement as cost of goods sold when –

1. Finished goods are sold

Explanation:

Finished goods are shown on balance sheet as ending inventory. When goods are sold the ending inventory of finished goods is transferred to cost of goods sold in the income statement.

Q13. Lakeshore Manufacturing

Computation of gross profit:

Gross profit = sales – cost of goods sold

Cost of goods sold = cost of goods manufactured + beginning finished goods inventory – ending finished goods inventory

= 12,600 + 17,000 – 11,500 = $18,100

Sales = 30,000

Gross profit = 30,000 – 18,100 = 11,900

Q14. Which of the following would use a process costing system rather than a job order costing system?

1. A paint manufacturer

Explanation:

Job order costing system is mostly suitable for custom jobs where the cost of direct material and direct labor are easily identifiable to a particular job.

However, process costing is suitable when items are identical and for processes where tracing exact costs of materials and labor to the finished product is difficult.

Hence, a paint manufacturer would use a process costing system.

Q15.

Melissa Manufacturing

Determination of the balance in the work in process inventory following the transactions:

Beginning work in process inventory                               $81,000

Add: direct materials issued to production     $37,000

Direct labor costs                                                  $6,000

Balance in work in process inventory               $124,000