Question

Last night, the sprinkler system at Plant A was accidentally set off. The ensuing deluge destroyed most of the cost records in Plant A for the month just completed (May). The plant manager has come to you in a panic—he has to complete his report for head office by the end of today. He wants you to give him the numbers he needs for his report. He can provide you with some fragments of information he has been able to salvage:

Raw materials: Beginning $24,000 Ending 55,200
Work in process: Beginning 15,000
Finished goods: Sold in May 404,800 Ending 51,800
Manufacturing overhead: Beginning 0
Accrued wages payable: Beginning 10,500 Ending 19,700
Other information:
1. Total direct materials requisitions for the month were $181,000.
2. A total of 9,600 direct labour hours were worked during the month at an average wage of $15/hour.
3. Manufacturing overhead of $100,800 was incurred during the period.
4. On May 31, the ending inventory of work in process is $5,300. Calculate the following:

The material purchased during May. Material purchased The amount paid to the labour force in May. Amount paid to the labour force The cost of goods transferred from work in process inventory to finished goods inventory in May. Cost of goods transferred from work in process inventory to finished goods inventory $ The cost of finished goods inventory at the beginning of May. Cost of finished goods inventory

Answer 1

Solution :

(1) Material Purchased :

Material Purchased = Closing Balance + Material Requested by Other Department - Opening Balance

= $ 55,200 + $ 181,000 - $ 24,000

= $ 212,200.

(2) Amount Paid to Labor Force :

Amount Paid to Labor Force = Op. Accrued Wages Payable + Wages Accrued in the Current month - Cl. Accrued Wages Payable

= $ 10,500 + (9,600 * $ 15) - $ 19,700

= $ 10,500 + $ 144,000 - $ 19,700

= $ 134,800.

(c) Cost of Goods Transferred to Finished Goods :   

Cost of Goods Transferred to Finished Goods = Op. WIP + Cost Incurred During the period - Closing WIP

   = $ 15,000 + ($ 181,000 + $ 144,000 + $ 100,800) - $ 5,300

= $ 15,000 + $ 425,800 - $ 5,300

= $ 435,500.

(d) Beginning Finished Goods :

Beginning Finished Goods = Cost of Goods Sold + Cl. Finished Goods - Cost of Goods Received

= $ 404,800 + $ 51,800 - $ 435,500

= $ 21,100.

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