Question

Comprehensive Problem Major League Bat Company 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. $25,000; Work in Process Inventory, $8,135 ($2,660 of direct materials and $5,475 of conversion) Finished Goods Inventory, $110,000; Sales, $0; Cost of Goods Sold, $o; Factory Wages Payable, $0; and Factory Overhead, $0. 1. Prepare journal entries to record the following July transactions and events. a. Purchased raw materials for $125,000 cash (the company uses a perpetual inventory system). b. Used raw materials as follows: direct materials, $52,440; and indirect materials, $10,000. c. Recorded factory wages payable costs as follows: direct labor, $202,250; and indirect labor, $25,000 d. Paid factory payroll cost of $227.250 with cash (ignore taxes) e. Incurred additional factory overhead costs of $80,000 paid in cash. f. 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.)

Answer 1

Answer:

Requirement -1

Journal Entries for July
	Particulars	Debit ($)	Credit ($)
a.	Raw Materials Inventory A/c Dr	125,000
	To Cash A/c		125,000
	(Being raw materials purchased for cash)
b.	Goods in process inventory A/c Dr	52,440
	Factory Overhead A/c Dr	10,000
	To Raw Materials Inventory A/c		62,440
	(Being Use of Raw mateials recorded)
c.	Fatory Payroll A/c Dr	227,250
	To Cash A/c		227,250
	(Being Factory Payroll Paid with Cash)
d.	Goods in process inventory A/c Dr	202,250
	Factory Overhead A/c Dr	25,000
	To Fatory Payroll A/c		227,250
	(Being direct and indirect Labour recorded)
e.	Factory Overhead A/c Dr	80,000
	To Cash A/c		80,000
	(Being other overheads are paid with cash)
f.	Goods in process inventory A/c Dr	101,125
	To Factory Overhead A/c		101,125
	(Being overheads are alocated at 50% of direct labour)

Requirement -2

Major League Bat company
Process Cost Summary
For Month Ended July 31st
Particulars	Amount ($)	Amount ($)
Costs Charged to Production:
Costs of beginning goods in process:
Direct Materials	2,660
Direct Labour	3,650
Factory Overhead	1,825	8,135
Costs Incurred this period :
Direct Materials	52,440
Direct Labour	202,250
Factory Overhead	101,125	355,815
Total Costs to Account for		363,950

Unit Cost Information :

Units To Account For	Amount ($)	Units To Account For	Amount ($)
Beginning Goods in Process	5,000	Complete & transferred out	11,000
Units Started this Period	14,000	Endng goods in process	8,000
Total Units To account For	19,000	Total Units To account For	19,000

Equivalents Units of Production	Direct Materials	Direct Labor	Factory Overhead
Units Complete & transferred out	11,000 Eup	11,000 Eup	11,000 Eup
Units of Ending Goods in Process
----Direct Materials (8000*100%)	8,000 Eup	-	-
----Direct Labour (8000*40%)	-	3,200 Eup	-
----Factory Overhead (8000*40%)	-	-	3,200 Eup
Equivalent Units Of Production	19,000 Eup	14,200 Eup	14,200 Eup

Cost per Equivalent Units of Production :

Particulars	Direct Materials	Direct Labor	Factory Overhead
Cost of beginning goods in process	2,660	3,650	1,825
Costs incurred this period	52,440	202,250	101,125
Total Costs (a)	55,100	205,900	102,950
EUP (b)	19,000 EUP	14,200 EUP	14,200 EUP
Cost Per EUP (a / b)	2.90	14.50	7.25

Allocation of Cost :

Particulars	Amount ($)	Amount ($)
Costs transferred out :
Direct Materials (11,000 EUP * $ 2.90)	31,900
Direct Labour (11,000 EUP * $ 14.50)	159,50
Factory Overhead (11,000 EUP * $ 7.25)	79,750	271,150
Costs of Ending Goods in Process :
Direct Materials (8,000 EUP * $ 2.90)	23,200
Direct Labour (3,200 EUP * $ 14.50)	46,400
Factory Overhead (3,200 EUP * $ 7.25)	23,200	92,800
Total Costs to Account for		363,950

Requirement -3

Journal Entries for July
	Particulars	Debit ($)	Credit ($)
g.	Finished Goods Inventory A/c Dr	271,150
	To Goods in process inventory A/c A/c		271,150
	(Being transerred to finished goods )
h.	Cash A/c Dr	625,000
	To Sales A/c		625,000
	(Being Sold finished goods for cash)
	Cost of Goods Sold A/c Dr	265,700
	To Finished Goods Inventory A/c		265,700
	(Being transerred from finished goods to cost of goods sold )

Requirement -4

General Ledger Accounts :

Raw Materials Inventory A/c A/c no :132
Date	Particulars	Debit ($)	Credit ($)	Balance
June 30	Balance			25,000
(a)	Purchase	125,000		150,000
(b)	Usage		62,440	87,560

Goods in Process Inventory A/c A/c no :133
Date	Particulars	Debit ($)	Credit ($)	Balance
June 30	Balance			8,135
(b)	Direct Materials	52,440		60,575
(d)	Direct Labour	202,250		262,825
(f)	Factory Overhead	101,125		363,950
(g)	Transfer to Finished Goods		271,150	92,800

Finished Goods Inventory A/c A/c no :135
Date	Particulars	Debit ($)	Credit ($)	Balance
June 30	Balance			110,000
(g)	Transfer from Finished Goods	271,150		381,150
(h)	July Sales		265,700	115,450

Sales A/c A/c no :413
Date	Particulars	Debit ($)	Credit ($)	Balance
(h)	July Sales		625,000	625,000

Cost Of Goods Sold A/c A/c no :502
Date	Particulars	Debit ($)	Credit ($)	Balance
(h)	July Sales	265,700		265,700

Factory Payroll A/c A/c no :530
Date	Particulars	Debit ($)	Credit ($)	Balance
(c)	July Sales	227,250		227,250
(d0	Allocation		227,250	0

Factory Overhead A/c A/c no :540
Date	Particulars	Debit ($)	Credit ($)	Balance
(b)	Indirect Materials	10,000		10,000
(d)	Indirect Labour	25,000		35,000
(e)	Other overhead costs	80,000		115,000
(f)	Factory Overhead		101,125	13,875

Requirement -5

Calculation of Gross Profit (July):

Particulars	Amount ($)
Sales	625,000
Costs of Goods Sold **	(279,575)
Gross Profit	345,425

** $ 279,575 = $ 265,700 + $ 13,875 (Underapplied Overhead)