Question

Drew Corp. designs and manufactures mascot uniforms for high school, college, and professional sports teams. Since each team’s uniform is unique in color and design, Drew uses a job order costing system. On January 1, the T-accounts for some of Drew’s primary balance sheet accounts were as follows:

Raw Materials Inventory

Work in Process Inventory

Beg.

15,000

Beg.

31,000

Accounts Receivable

Accounts Payable

Beg.

56,000

Beg.

42,000

Finished Goods

Cash

Beg.

22,000

Beg.

32,000

During the year, the following events occurred:

1.	Drew purchased raw materials costing $86,000 on account.
2.	Drew used $93,000 of raw materials in production. Of these, 70% were classified as direct materials and 30% as indirect materials. (Drew maintains a single Raw Materials Inventory account.)
3.	Drew used 31,200 hours of direct labor. The company’s average direct labor rate was $7.50 per hour (credit Wages Payable).
4.	The company’s only indirect labor cost was the salary of a security guard hired to watch the company’s shop after hours. The guard’s annual salary was $25,000 (credit Wages Payable).
5.	Other manufacturing overhead costs the company incurred on account totaled $70,000.
6.	Drew applied $130,000 in manufacturing overhead.
7.	The company completed production of goods costing $326,000.
8.	The company’s Cost of Goods Sold balance was $303,750 before adjusting for over- or underapplied overhead.
9.	Sales revenue was $425,000 (all sales were made on account).
10.	Drew collected $450,000 from customers.
11.	The company paid accounts payable of $100,000.
	12. At year-end, all wages earned during the year had been paid. A. Calculate under- or overapplied overhead for the year Overhead Overapplied by $7,100 b. Assuming that Drew closes under- or overapplied overhead to Cost of Goods Sold, calculate the cost of goods sold for the year Adjusted Cost of Goods Sold: $296,650

c. Assuming that Drew prorates under- or overapplied overhead to the appropriate accounts, calculate the adjusted Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold balances for the year. (Round % of total and final answers to 2 decimal places, e.g. 52.75% or 52.75.) Solve for C please. Thanks

Answer 1

c.

	Adjusted Balance
Work In Process	132124.78
Finished Goods	43598.22
Cost of Goods Sold	299276.29

Working:

Unadjusted Ending Balance - Work in process:

Beginning balance	31000
Direct materials (70% x $93000)	65100
Direct labor (31200 x $7.50)	234000
Manufacturing overhead	130000
	460100
Less: Transferred to finished goods	326000
Unadjusted ending balance	134100

Unadjusted Ending Balance - Finished Goods:

Beginning balance	22000
Transferred from work in process	326000
	348000
Less: Cost of goods sold	303750
Unadjusted ending balance	44250

	Unadjusted Ending Balance $	Percent of Total	Overapplied Overhead Allocated $	Adjusted Ending Balance $
WIP	134100	27.82%	1975.22	132124.78
FG	44250	9.18%	651.78	43598.22
COGS	303750	63.01%	4473.71	299276.29
Total	482100	100.00%	7100.00	474999.29

Adjusted ending balance = Unadjusted ending balance - Overapplied overhead Allocated

Note: Since the amount of overhead in WIP, FG, and COGS is not provided, the overapplied overhead has been allocated based on the unadjusted balances in the respective accounts rather than on the basis of overhead component in each account.