Question

Exercise 1-12 Product and Period Cost Flows (LO1-3] The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 6,290 batteries at a cost of $95 per battery. It withdrew 5,800 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company's traveling sales staff. The remaining 5,700 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90 percent were completed and transferred from work in process to finished goods. Of the cars completed during the month, 30 percent were unsold at April 30th. Required: 1. Determine the cost of batteries that would appear in each of the following accounts on April 30th. Answer is complete but not entirely correct. Cost 1a. 10. Name of the Account Raw Materials Work in Process Finished Goods Cost of Goods Sold Selling Expense S 4,900 X S 560 X $15,120 X $35,280X $1,000 1d. 1e.

Answer 1

Ans:

		Cost
1a	Raw materials	46,550
1b	Work in process	54,150
1c	Finished goods	146,205
1d	Cost of goods sold	341,145
1e	Selling expense	9,500

Explanation:

1a)

Raw materials = 490 batteries x cost per battery

= 490 x 95

= $46,550

1b)

Work in process = Batteries withdrawn for production x 10% x cost per battery

= 5,700 x 10% x 95

= $54,150

1c)

Finished goods = Batteries withdrawn for production x 90% x Units unsold % x cost per battery

= 5,700 x 90% x 30% x 95

= $146,205

1d)

Cost of goods sold = Batteries withdrawn for production x 90% x Units sold % x cost per battery

= 5,700 x 90% x 70% x 95

= $341,145

1e)

Selling expense = Cost of 100 batteries used to replace batteries in car used by company's travelling sales staff

= 100 x 95

=$9,500