Question

Major League Bat Company manufactures baseball bats. In addition to its work in process inventories, the company maintains inventories of raw materials and finished goods. It uses raw materials as direct materials in production and as indirect materials. Its factory payroll costs include direct labor for production and indirect labor. All materials are added at the beginning of the process, and conversion costs are applied uniformly throughout the production process.

Required:
You are to maintain records and produce measures of inventories to reflect the July events of this company. The June 30 balances: Raw Materials Inventory, $39,000; Work in Process Inventory, $11,585 ($3,660 of direct materials and $7,925 of conversion); Finished Goods Inventory, $200,000; Sales, $0; Cost of Goods Sold, $0; Factory Wages Payable, $0; and Factory Overhead, $0.

1. Prepare journal entries to record the following July transactions and events.

1. Purchased raw materials for $215,000 cash (the company uses a perpetual inventory system).
2. Used raw materials as follows: direct materials, $70,090; and indirect materials, $20,000.
3. Recorded factory wages payable costs as follows: direct labor, $227,250; and indirect labor, $35,000.
4. Paid factory payroll cost of $262,250 with cash (ignore taxes).
5. Incurred additional factory overhead costs of $100,000 paid in cash.
6. Applied factory overhead to production at 50% of direct labor costs.

2. Information about the July inventories follows. Use this information with that from part 1 to prepare a process cost summary, assuming the weighted-average method is used. (Round "Cost per EUP" to 2 decimal places.)

Units
Beginning inventory	12,500	units
Started	17,000	units
Ending inventory	11,000	units
Beginning inventory
Materials—Percent complete	100	%
Conversion—Percent complete	70	%
Ending inventory
Materials—Percent complete	100	%
Conversion—Percent complete	30	%

3. Using the results from part 2 and the available information, make computations and prepare journal entries to record the following:

7. Total costs transferred to finished goods for July.
8. Sale of finished goods costing $315,700 for $725,000 in cash.

4. Post entries from parts 1 and 3 to the following general ledger accounts.
5. Compute the amount of gross profit from the sales in July. (Hint: Add any underapplied overhead to, or deduct any overapplied overhead from, the cost of goods sold.)

Answer 1

(a) No. Transaction Raw Materials inventory cash Debit Credit 215000 a 215000 b Work in process inventory Factory overhead Raw Materials inventory 70090 20000 90090 227250 Work in process inventory Factory overhead Factory Wages payable 35000 262250 d 262250 Factory Wages payable cash 262250 e 100000 Factory overhead cash 100000 f 113625 Work in process inventory Factory overhead 227250*0.5 113625

11585 (b) Total costs to account for Cost of Beginning WIP Costs incurred this period Total costs to account for total costs accounted for Difference due to rounding 410965 422550 422550 0 12500 17000 29500 Units to account for Beginning WIP Units started this period total units to account for total units accounted for units completed and tfd out ending wip-units total units accounted for 18500 11000 29500 units 1% mat 18500 eup-mat 18500 11000 100% 100% %lab 100% 30% EUP-conversion 18500 11000 3300 29500 21800 Conversion 29500 Materials 3660 70090 73750 Costs 29500 EUP 7925 340875 Costs EUP 348800 21800 2.5 16 Units completed and tfd out ending wip-units total units Cost per equivalent unit cost of beginning WIP cost incurred this period total costs equivalent units of production Cost per equivalent unit Total costs accounted for Costs of units tfd out direct materials conversion total costs tfd out costs of ending WIP direct materials conversion total costs of ending WIP Total costs accounted for EUP Cost per EUP 18500 Total cost 46250 2.5 18500 16 296000 342250 11000 2.5 27500 3300 16 52800 80300 422550

('c) No. Transaction Finished goods inventory Work in process inventory Debit Credit 342250 342250 (h) Cash 725000 sales 725000 315700 Cost of goods sold Finished goods inventory 315700 (e) Gross profit 367925 725000 315700 sales cost of goods sold underapplied overhead gross profit 41375 367925

(d) Raw Material inventory date Debit Credit Balance Jun-30 39000 (a) 215000 254000 (b) 90090 163910 Work in process inventory date Debit Credit Balance Jun-30 11585 |(b) 70090 81675 ('c) 227250 308925 |(f) 113625 422550 342250 80300 Finished goods inventory date Debit Credit Balance Jun-30 200000 (g) 342250 542250 (h) 315700 226550 Sales Credit date Debit Balance (h) 725000 725000 Factory wahes payable date Debit Credit Balance ('c) 227250 227250 |('c) 35000 262250 (d) 262250 0 date |(h) Cost of goods sold Debit Credit 315700 Balance 315700 Balance date (b) (c) (e) (f) Factory overhead Debit Credit 20000 35000 100000 20000 55000 155000 113625 41375