Question

Selected T-accounts for Moore Company are given below for the just completed year Raw Materials Manufacturing Overhead Credits ? Bal. 1/1 Debits 36,000 440,000 Debits 214,000 Credits Bal 12/31 51,000 Work in Process Factory Wages Payable 173,000 Bal 1/1 Debits Bal. 1/1 Direct materials Credits 12,000 77,000 323,000 550,000 Credits 176,000 Direct labor Overhead 156,000 Bal 12/31 15,000 249,600 Bal 12/31 ? Finished Goods Cost of Goods Sold Bal. 1/1 Debits 40,000 ? Credit ? Debits ? Bal 12/31 137.000 Required: 1. What was the cost of raw materials put into production during the year? Cost of raw materials 2. How much of the materials in (1) above consisted of indirect materials? Indirect materials 3. How much of the factory labor cost for the year consisted of indirect labor? Indirect labor cost

Answer 1

In this question some data is missing. So first of all we will systematically prepare all accounts required for answering the question as follows.

Raw Material control A/c

Particulars	Amount	Particulars	Amount
To balance b/d	36000	By work-in-progress	323000
To GLA (purchases)	440000	BY Manufacturing overhead	102000
		By balance c/d	51000
	476000		476000

Here, GLA is general ledger adjustment account, which is also known as nominal ledger account. In this question credit side is missing, in which we got the idea that raw material should go to wip(work in progress) A/c for further processing. The balance left is transferred to manufacturing overhead a/c i.e. 102000.

Work-in-progress control A/c

Particulars	Amount	Particulars	Amount
To balance b/d	77000	By finished stock	550000
To Raw material A/c	323000	By balance c/d	255600
To direct labour	156000
To overhead	249600
	805600		805600

In case of work in progress we will transfer wip inventory to finished stock after processing and it is given in the question that credit side is 550000 so it is amount transfered to finished stock control account and remaining is balance left i.e 255600.

Finished stock control A/c

Particulars	Amount	Particulars	Amount
To balance b/d	40000	By cost of sales control A/c i.e. (cost of goods sold)	453000
To work in progress	550000	By balance c/d	137000
	590000		590000

in finished stock control a/c we can easily find that missing amount is due to cost of sales control a/c i.e. amount of cost of goods sold.

Manufacturing overhead A/c

Particulars	Amount	Particulars	Amount
To wages control	20000	By work in progress A/c	249600
To Raw material control A/c	102000
To GLA ( payment)	127600

manufacturing overhead account is charged to wip a/c i.e. 249600 and the balance in debit side is 20000 which is due to wages control a/c. debit raw material account i.e. indirect material 102000. hAnd the remaining balance is trfd. to GLA A/c

wages control A/c

Particulars	Amount	Particulars	Amount
To GLA	173000	By balance b/d	12000
To balance c/d	15000	by work in progress	156000
		BY Manufacturing overhead A/c	20000

In wages control A/c it is given that balance opening is 12000 to be written on credit side because it is case of outstanding wages. similiarly we will write closing balance on debit side. Further we can get an idea from work in progress account that the amount charged in wip a/c is 156000, which will be credited in this account. After all we found that in question it is ginen 173000 in debit side and 176000 in credit side. the debit side amount shows payment of wages and trfd. to GLA a/c and the credit side amount is further divided b/w 156000 as wip a/c and the balance as manufacturing overhead a/c.

Cost of sales control A/c

Particulars	Amount	Particulars	Amount
To finished stock control A/c	453000	By sales control A/c	453000
	453000		453000

The balance of finished stock A/c is further transfered to cost of sales a/c i.e. 453000

Sales control A/c

Particulars	Amount	Particulars	Amount
To Cost of sales control A/c	453000	By GLA	453000
	453000		453000

and similiarly the balance of cost of sales a/c further trfd. to sales control A/c.

Answers -

1. Cost of raw material put in production during the year is 425000. shown in raw material a/c. (direct 323000 + indirect 102000)

2. how much of the materials in 1 above consisted of indirect material = 102000

3. 20000 of the factory labour cost for the year consisted of indirect labour refer wages control account

4.cost of goods manufactured for the year 453000. refer cost of sales control account.

5.what was cost of goods sold for the year 453000 as volume of slaes is not given in the question, we will assume whole finished goods produced are sold.

6.if overhead is applied to production on the basis of direct labour cost , what rate in effect during the year - 249600/156000 = 1.6

7. manufacturing overhead under applied i.e. 249600-127600=122000

8. ending balance in wip account is 255600 if direct labour cost is 32600 than direct material cost and manufacturing overhead cost is 323000, and 450000. as direct material cost will not be changed because it is alrady clearly given in wip account that direct material cost is 323000.