Question

Bowen Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. Its predetermined overhead rate includes $1,000,000 of fixed overhead in the numerator and 50,000 direct labor-hours in the denominator. The company purchased (with cash) and used 58,000 yards of raw materials at a cost of $11.80 per yard. Its direct laborers worked 21,000 hours and were paid a total of $292,000. The company started and completed 10,100 units of finished goods during the period. Bowen's standard cost card for its only product is as follows: - (2) Inputs Direct materials Direct labor Fixed manufacturing overhead Total standard cost per unit (1) Standard Quantity or Hours 5.0 yards 4.4 hours 4.4 hours Standard Price or Rate $20.00 per yard $14.00 per hour $20.00 per hour Standard Cost (1) x (2) $100.00 61.60 88.00 $249.60 Required: 1. When recording the raw material purchases: a. The Raw Materials inventory will increase (decrease) by how much? b. The Cash will increase (decrease) by how much? 2. When recording the raw materials used in production: a. The Raw Materials inventory will increase (decrease) by how much? b. The Work in Process inventory will increase (decrease) by how much? 3. When recording the direct labor costs added to production: a. The Work in Process inventory will increase (decrease) by how much? b. The Cash will increase (decrease) by how much? 4. When applying fixed manufacturing overhead to production, the Work in Process inventory will increase (decrease) by how much? 5. When transferring manufacturing costs from Work in Process to Finished Goods, the Finished Goods inventory will increase (decrease) by how much?

Answer 1

1. a 1.b 2.a 2.b 3.a 3.b 4.a Raw material will purchase increase by 7500 cash outgo will increased by $ 150000 material used decreased by 7500 yards WIP inventory will increase by 1500 yards Direct Labor hours will increase by 6600 Direct Labor cash will increase by $92400 Manfacturing overhead qty will increase by 6600 Cash will increase by $132000 Ithe finished good inventory will increase by 1500 yards