Question

[The following information applies to the questions displayed below.) The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system. April 30 May 31 $ $41,000 9,200 57,000 56,000 18,500 34,700 Inventories Raw materials Work in process Finished goods Activities and information for May Raw materials purchases (paid with cash) Factory payroll (paid with cash) Factory overhead Indirect materials Indirect labor Other overhead costs Sales (received in cash) Predetermined overhead rate based on direct labor cost 191,000 200,000 13,000 46,000 119,500 1,700,000 55% Compute the following amounts for the month of May using T-accounts. 1. Cost of direct materials used. 2. Cost of direct labor used. 3. Cost of goods manufactured. 4. Cost of goods sold.* 5. Gross profit. 6. Overapplied or underapplied overhead.

Answer 1

Part 1

Cost of direct materials used = Raw materials (April 30) + Purchases - Raw materials (May 31) - Indirect materials

=41000+191000-56000-13000 = 163000

Part 2

Cost of direct labor used = Factory payroll - Indirect labor

=200,000- 46,000 = 154000

Part 3

For computing cost of goods manufactured first we will need to compute applied factory overhead:

Applied factory overhead = Direct labor x Overhead rate

Applied factory overhead = $154000 x 55% = $84,700

Cost of goods manufactured = Direct materials used + Direct labor + Applied factory overhead + Work in process (April 30) - Work in process (May 31).

=163000+ 154000 +84700 +9200-18500 = 392400

Part 4

Cost of goods sold = Cost of goods manufactured + Finished goods (April 30) - Finished goods (May 31)

=392400+57000-34700= 414700

Part 5

Gross profit= Sales - cost of goods sold

=1,700,000-414700= 1285300

Part 6

Actual overhead = Indirect materials + Indirect labor + Other factory overhead

=13000+46000+119500= $178500

Over applied (Under applied) overhead = Applied overhead - Actual overhead

=$84,700- $178500 = (93800)