Question

Panzarella Company manufactures soccer balls in two sequential processes: Cutting and Stitching. All direct materials enter production at the beginning of the Cutting process. The following information is available regarding its May inventories: Raw materials inventory Work in process inventory-Cutting Work in process inventory-stitching Finished goods inventory Beginning Inventory $146,000 323,500 343,300 300,100 Ending Inventory $177,850 65,500 200,500 64,250 The following additional information describes the company's production activities for May. Direct materials Raw materials purchased on credit Direct materials used-Cutting Direct materials used-stitching $ 165,000 28,750 Direct labor Direct labor-Cutting Direct labor-stitching Total factory payroll paid (in cash) $ 29,600 118,400 208,600 Factory Overhead (Actual costs) Indirect materials used Indirect labor used Other overhead costs $104,400 60,600 75,000 Factory Overhead Rates Cutting (150% of direct materials used) Stitching (120% of direct labor used) Sales $1,456,000

Answer 1

1	Ending balance in raw materials inventory:
					$	$
	Beginning raw materials inventory					146000
	Add: Materials purchased					165000
	Materials available for use					311000
	Less:
	Direct materials used
	Cutting				28750
	Stitching				0
	Indirect materials used				104400	133150
	Ending raw materials inventory					177850
2	Cost of goods manufactured-Cutting:
						$
	Direct materials used					28750
	Direct labor					29600
	Factory overhead-150% of direct material used
	(28750*150%)					43125
	Total manufacturing costs added during May					101475
	Add: Beginning work in process inventory					323500
	Total cost of work in process					424975
	Less: Ending work in process					65500
	Cost of goods manufactured					359475
3	Cost of goods manufactured-Stitching:
						$
	Direct materials used					0
	Direct labor					118400
	Factory overhead-120% of direct labor used
	(118400*120%)					142080
	Total manufacturing costs added during May					260480
	Add: Beginning work in process inventory					343300
	Total cost of work in process					603780
	Less: Ending work in process					200500
	Cost of goods manufactured					403280
4	Cost of goods sold:
						$
	Cost of goods manufactured					403280
	Add:Beginning finished goods inventory					300100
	Cost of goods available for sale					703380
	Less:Ending finished goods inventory					64250
	Cost of goods sold					639130
5	Gross profit:
						$
	Sales					1456000
	Less: Cost of goods sold					639130
	Gross profit					816870
	Journal entry:
	Date	Account title					Debit	Credit
	May 31.	Work in process inventory-Stitching				(Refer 2)	359475
		Work in process inventory-Cutting						359475
		(Transferred cost of partially completed jobs)					`
	May 31.	Finished goods inventory				(Refer 3)	403280
		Work in process inventory-Stitching						403280
		(Transfer of production to finished goods)
	May 31.	Cost of goods sold				(Refer 4)	639130
		Finished goods inventory						639130
		(Cost of goods sold recorded)
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