Question

Analyzing Manufacturing Cost Accounts

Fire Rock Company manufactures designer paddle boards in a wide variety of sizes and styles. The following incomplete ledger accounts refer to transactions that are summarized for June:

Materials
June 1	Balance	34,600	June 30	Requisitions	(A)
June 30	Purchases	139,100

Work in Process
June 1	Balance	(B)	June 30	Completed jobs	(F)
June 30	Materials	(C)
June 30	Direct labor	(D)
June 30	Factory overhead applied	(E)

Finished Goods
June 1	Balance	0	June 30	Cost of goods sold	(G)
June 30	Completed jobs	(F)

Wages Payable
			June 30	Wages incurred	121,300

Factory Overhead
June 1	Balance	22,100	June 30	Factory overhead applied	(E)
June 30	Indirect labor	(H)
June 30	Indirect materials	18,500
June 30	Other overhead	73,700

In addition, the following information is available:

a. Materials and direct labor were applied to six jobs in July:

Job No.		Style	Quantity		Direct Materials				Direct Labor
201		T100	220			$25,040				$16,000
202		T200	400			38,200				26,000
203		T400	210			15,780				9,000
204		S200	260			37,700				26,000
205		T300	180			24,000				17,000
206		S100	110			7,210				3,000
		Total	1,380			$147,930				$97,000

b. Factory overhead is applied to each job at a rate of 140% of direct labor cost.

c. The June 1 Work in Process balance consisted of two jobs, as follows:

Job No.	Style	Work in Process, June 1
201	T100	$6,300
202	T200	15,800
Total		$22,100

d. Customer jobs completed and units sold in July were as follows:

Job No.	Style	Completed in July	Units Sold in July
201	T100	X	176
202	T200	X	320
203	T400		0
204	S200	X	218
205	T300	X	149
206	S100		0

1. Determine the missing amounts associated with each letter and complete the following table. If required, round amounts to the nearest dollar. If an answer is zero, enter in "0". Enter all amounts as positive numbers.

Job No.	Quantity	June 1 Work in Process		Direct Materials		Direct Labor		Factory Overhead		Total Cost		Unit Cost		Units Sold	Cost of Goods Sold
No. 201		$ 6,300		$ 25,040		$ 16,000		$		$		$				$
No. 202		15,800		38,200		26,000
No. 203				15,780		9,000
No. 204				37,700		26,000
No. 205				24,000		17,000
No. 206				7,210		3,000
Total		$22,100		147,930		97,000		$		$						$

a. Materials Requisitions $

b. Work in Process Beginning Balance $

c. Direct Materials $

d. Direct Labor $

e. Factory overhead applied $

f. Completed jobs $

g. Cost of goods sold $

h. Indirect labor $

2. Determine the June 30 balances for each of the inventory accounts and factory overhead. Use the minus sign to indicate any credit balances.

Materials:	$
Work in Process:	$
Finished Goods:	$
Factory Overhead:	$

Answer 1

Answer:

1.

Job No.	Quantity	June 1 Work in process	Direct Materials	Direct Labor	Factory overhead	Total completed Jobs	Unit cost	Unit sold	Cost of goods sold
201	220	6,300	25,040	16,000	22,400	69,740	317	176	55,792
202	400	15,800	38,200	26,000	36,400	116,400	291	320	93,120
203	210		15,780	9,000	12600	37,380
204	260		37,700	26,000	36,400	100,100	385	218	83,930
205	180		24,000	17,000	23,800	64,800	360	149	53,640
206	110		7,210	3,000	4,200	14,410
	1,380	22,100	147,930	97,000	135,800	402,830			286,482

a. Materials Requisitions	163,730
b. Work in Process Beginning Balance	22,100
c. Direct Materials	147,930
d. Direct Labor	97,000
e. Factory overhead applied	135,800
f. Completed jobs	351,040
g. Cost of goods sold	286,482
h. Indirect labor	24,300

2.

Materials:	9,970
Work in Process:	51,790
Finished Goods:	64,558
Factory Overhead:	2,800

Calculation:

First we need to calculate the total materials both the direct and indirect which is allowed to production.

Total Materials Issued = Direct Materials Issued + Indirect Materials Issued = $147,930 + $15,800 = $163,730

Then we need to calculate the total factory overhead applied for the month.

Total Overhead Applied = Direct Labor Cost × Predetermined Factory Overhead Rate = $97,000 × 140% = $135,800

Next step is to compute the total amount of completed jobs for the period. From here we get the total of  Work in Process Beginning Balance, Direct Materials, direct labor, Factory overhead applied, Completed jobs.

Job No.	Quantity	June 1 Work in process (a)	Direct Materials (b)	Direct Labor (c)	Factory overhead (d) = (c)x140%	Total completed Jobs (e) =(a)+(b)+(c)+(d)
201	220	6,300	25,040	16,000	22,400	69,740
202	400	15,800	38,200	26,000	36,400	116,400
204	260		37,700	26,000	36,400	100,100
205	180		24,000	17,000	23,800	64,800
	1,060	22,100	124,940	85,000	119,000	351,040

Then we need to find the actual indirect labor cost incurred for the month.

Actual Indirect Labor Incurred = Total Wages Incurred + Total Direct Labor Incurred = $121,300 − $97,000= $24,300

Then we need to find the cost of goods sold

Job No.	Quantity (a)	Total completed Jobs (b)	Unit cost (c) = (b)/(a)	Unit sold (d)	Cost of goods sold (e) = (c) x (d)
201	220	69,740	317	176	55,792
202	400	116,400	291	320	93,120
203	210	37,380
204	260	100,100	385	218	83,930
205	180	64,800	360	149	53,640
206	110	14,410
	1,380	402,830			286,482

2.

First we need to find the amounts of materials ending inventory as of June 30.

Materials Ending Balance = Materials, June 1 + Materials Purchased − Materials Requisitioned = $34,600+ $139,100 − $163,730 = 9,970

Then we need to calculate the amount of ending work in process as of June 30.

It is the unfinished jobs for the month for Job 203 and 206.

Job No.	Quantity	June 1 Work in process	Direct Materials	Direct Labor	Factory overhead	June 31 Work in process
203	210		15,780	9,000	12,600	37,380
206	110		7,210	3,000	4,200	14,410
	320	0	22,990	12,000	16,800	51,790

Then we need to find the amount of ending finished goods inventory.

Job No.	Remaining Units (a)	Unit cost (b)	Total remaining inventory (a) x (b)
201	44	317	13,948
202	80	291	23,280
204	42	385	16,170
205	31	360	11,160
Total	197		64,558

Atlast we need to compute the amount of ending balance of factory overhead.

Factory Overhead June 1	22,100
Indirect labor	24,300
Indirect Materials	18,500
Other overhead	73,700
Less: Applied factory Overhead	135,800
Factory Overhead June 1	2,800