Question

In: Accounting

a. a. For May 2020, the cost of Direct Materials transferred into the Filling Dept. of...

a.

a. For May 2020, the cost of Direct Materials transferred into the Filling Dept. of a liquid soap company is $20,200. Direct Labor cost incurred for the same department is unknown, and Factory Overhead cost applied to production is 80% of Direct Labor cost. The total cost of finished goods transferred out of the Filling Dept. is $85,600. The cost of beginning work in process (WIP) inventory in the Filling Dept. on May 1 was $12,000 and the ending balance in WIP Inventory-Filling on May 31 is $6,000. Calculate the cost of Direct Labor incurred by the Filling Dept. during May 2020.

b. The following data is taken from the production budget for the year: Beginning finished goods units 11,000; Units to be produced in the first quarter 82,000; First quarter sales units 58,000; Sales units budgeted for the second quarter 68,000. Second quarter finished goods inventory is budgeted at 12,000 units. Calculate units to produce in the second quarter.

Solutions

Expert Solution

a. Computation of cost of Direct Labor incurred by the Filling Dept. during May 2020:

Let Direct labor Cost = X

Therefore, factory overhead = 0.8X

As we know that:

Total cost of finished goods transferred out of the Filling Dept = Opening Work in progress + Direct Material Cost + Labour Cost + Factory Overhead - Closing Work in progress

$85,600 = $12,000 + $20,200 + X + 0.8X - $6,000

$85,600 - $12,000 - $20,000 + $6,000 = 1.8X

Therefore, X = $33,000

Hence, Direct Labor incurred by the Filling Dept. during May 2020 = $33,000.

b. Computation of units to produce in the second quarter:

To compute the no of units to be produced in the second quarter, we will first need to compute the ending inventory of first quarter which will be done as follows;

We know that:

Sales units = Opening units + Production - Closing units

58,000 = 11,000 + 82,000 - Closing units

Therefore, closing stocks at the end of first quarter = 35,000

Now for the second quarter,

Sales units = Opening units + Production - Closing units

68,000 = 35,000 + Production - 12,000

Therefore, production for the second quarter = 45,000 units

ekkarill92 answered 2 years ago
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