Question

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
Inventories
Raw materials	$	41,000			$	45,000
Work in process		9,600				20,400
Finished goods		56,000				33,700
Activities and information for May
Raw materials purchases (paid with cash)						192,000
Factory payroll (paid with cash)						150,000
Factory overhead
Indirect materials						14,000
Indirect labor						34,500
Other overhead costs						108,500
Sales (received in cash)						1,400,000
Predetermined overhead rate based on direct labor cost						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.

  
*Do not consider any underapplied or overapplied overhead.

	Income statement (partial) Sales $1,400,000 Cost of goods sold Gross profit $1,400,000

Raw Materials (RM) Work in Process (WIP) April 30 41,000 14,000 Indirect materials April 30 9,600 Cost of goods manuf. RM purchases 192,000 (153,500) DM used DM used (153,500) DL used 115,500 Overhead applied 63,525 May 31 372,500 May 31 35,125 Finished Goods (FG) Inventory Factory Overhead April 30 56,000 Cost of goods sold Indirect materials 14,000 63,525 Overhead applied Cost of goods manuf. Indirect labor 34,500 Other overhead costs 108,500 April 30 56,000

Answer 1

	Raw materials (RM)						Work in Process (WIP)
RM-April 30	41000					WIP-April 30	9600
RM purchases	192000					DM used	174000
		14000	Indirect materials			DL used	115500
		174000	DM used			Overhead applied	63525	342225	Cost of goods manuf.
RM-May 31	45000					WIP-May 31	20400
	Finished goods (FG)						Factory Overhead
FG-April 30	56000					Indirect materials	14000	63525	Overhead applied
Cost of goods manuf.	342225					Indirect labor	34500
		364525	Cost of goods sold			Other overhead costs	108500
FG-May 31	33700
						Underapplied OH	93475
Income Statement (Partial)
Sales	1400000
Cost of goods sold	364525
Gross Profit	1035475