Question

Problem 20-1A Production cost flow and measurement; journal entries LO P1, P2, P3, P4

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Sierra 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:

	Beginning Inventory			Ending Inventory
Work in process inventory—Cutting		93,500			85,500
Work in process inventory—Stitching		113,300			76,000
Finished goods inventory		30,100			18,250

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

Direct materials
Raw materials purchased on credit	$	50,000
Direct materials used—Cutting		23,000
Direct materials used—Stitching		0

Direct labor
Direct labor—Cutting	$	18,100
Direct labor—Stitching		72,400
Total factory payroll paid (in cash)		146,500

Factory Overhead (Actual costs)
Indirect materials used	$	21,600
Indirect labor used		56,000
Other overhead costs		52,000

Factory Overhead Rates
Cutting	(150% of direct materials used			)
Stitching	(120% of direct labor used			)
Sales	$456,000

Problem 20-1A Part 1

Required:
1. Compute the amount of (a) production costs transferred from Cutting to Stitching, (b) production costs transferred from Stitching to finished goods, and (c) cost of goods sold.oods, and (c) cost of goods sold.

Answer 1

Solutions:

a.

Cost of products transferred from Cutting to stiching
Particulars	Amount
Raw material used in Cutting	$23,000.00
Direct Labor - Cutting	$18,100.00
Manufacturing overhead Applied - cutting (150% of Direct materials)	$34,500.00
Cost Incurred during the period in production	$75,600.00
Add: Opening WIP	$93,500.00
Less: ending WIP	$85,500.00
Cost of goods transferred from Cutting to stiching	$83,600.00

b.

Cost of products transferred from Stiching to Finished Goods
Particulars	Amount
Cost of goods transferred from cutting	$83,600.00
Raw material used in stiching	$0.00
Direct Labor - stiching	$72,400.00
Manufacturing overhead Applied - stiching (120% of DL)	$86,880.00
Cost Incurred during the period in production	$2,42,880.00
Add: Opening WIP	$1,13,300.00
Less: ending WIP	$76,000.00
Cost of goods manufactured and transferred to finished goods	$2,80,180.00

c.

Schedule of cost of goods Sold
Particulars	Amount
Beginning finished goods inventory	$30,100.00
Add: Cost of goods manufactured	$2,80,180.00
Less: ending finished goods inventory	$18,250.00
Cost of goods sold	$2,92,030.00