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	$	30,000			$	48,000
Work in process		9,300				19,300
Finished goods		59,000				33,400
Activities and information for May
Raw materials purchases (paid with cash)						188,000
Factory payroll (paid with cash)						300,000
Factory overhead
Indirect materials						9,000
Indirect labor						69,000
Other overhead costs						110,500
Sales (received in cash)						1,700,000
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.

Answer 1

 

 

Raw material account

Raw material -April 30	30000	Indirect material	9000
Raw material purchased	188000	Direct material used *	161000
Raw material on May 31	48000

Factory payroll

Factory payroll	300000	Indirect labor	69000
		Direct labor used*	231000

Factory overhead

Indirect material	9000	Over head applied	127050
Indirect labor	69000
Other OH costs	110500
Under applied OH	61450

Work in process

GIP April 30	9300	Cost of goods manufactured	509050
DM used	161000
DL used	231000
Overhead applied	127050
GIP May 31	19300

 

 

 

Finished goods

FG april 30	59000	Cost of goods sold	534650
Cost of goods manufactured	509050
FG may 31	33400

 

 

Income statement partial

Sales :                                                      1700000

Less:cost of goods sold                            (534650)

Gross profit                                                1165350

EXPLANATION

(i) Cost of direct material used

Particulars	Amount in $
Beginning raw materials inventory	30000
Add: Purchases	188000
Raw materials available	218000
Less ending raw materials inventory	(48000)
Total raw materials used	170000
Less indirect materials used	(9000)
Cost of direct materials used	161000

(ii) Cost of direct labor used:

Particulars	Amount in $
Total factory payroll	300000
Less: Indirect labor	(69000)
Cost of direct labor used	231000

(iii) Cost of goods manufactured

Particulars	Amount in $
Beginning goods in process inventory	9300
Add: direct material	161000
Add: direct labor	231000
Add: overhead applied (55%)	127050
Total cost of goods in process	528350
Less: Ending goods in process inventory	(19300)
Cost of goods manufactured	509050

(iv) Cost of goods sold

Particulars	Amount in $
Beginning finished goods inventory	59000
Add: Cost of goods manufactured	509050
Less: ending finished goods inventory	(33400)
Cost of goods sold	534650

(v) Gross profit

Particulars	Amount in $
Sales	1700000
Less: cost of goods sold	(534650)
Gross profit	1165350

(vi) Overapplied or underapplied overhead

Particulars	Amount in $
Indirect material	9000
Indirect labor	69000
Other overhead costs	110500
Total actual overhead incurred	188500
Less: Overhead applied	(127050)
Under applied overhead	61450