Question

Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information is available regarding its May inventories.

	Beginning Inventory			Ending Inventory
Raw materials inventory	$	60,000		$	92,500
Work in process inventory		435,000			515,000
Finished goods inventory		633,000			605,000

The following additional information describes the company's production activities for May.

Raw materials purchases (on credit)	$	250,000
Factory wages cost (paid in cash)		1,530,000
Other overhead cost (Other Accounts credited)		87,000
Materials used
Direct	$	157,500
Indirect		60,000
Labor used
Direct	$	780,000
Indirect		750,000
Overhead rate as a percent of direct labor		115	%
Sales (on credit)	$	2,500,000

rev: 09_05_2017_QC_CS-97362

Required:
1. Compute the cost of products transferred from production to finished goods and cost of goods sold.

Answer 1

Raw materials (RM)					Work in process (WIP)
					Beg bal	435,000	Trsfd	1,754,500
Beg bal	60,000	Direct M	157,500		DM used	157,500
purchases	250,000	indirect mat	60,000		DL used	780,000
					OH applied	897000
ending bal	92,500
					end bal	515,000
Factory wages payable					finished goods (FG)
cash	1,530,000	dL used	780,000		beg bal	633,000	COGS	1,782,500
		indirect la	750,000		Tsfd	1,754,500
end bal	0				end bal	605,000
Factory overhead					income statement (partial)
other	87,000	oh applied	897,000		Sales			2,500,000
indirct mat	60,000				cost of goods sold			1,782,500
indirect la	750,000				Gross margin			717,500
end bal	0	0
					Cost of goods transferred			1,754,500
					Cost of goods sold			1,782,500