Question

Old Tyme Soda produces one flavor of a popular local soft drink. It had no work-in-process on October 31 in its only inventory account. During November, Old Tyme started 10,400 barrels. Work-in-process on November 30 is 1,400 barrels. The production supervisor estimates that the ending work-in-process inventory is 30 percent complete. An examination of Old Tyme’s accounting records shows direct material costs of $18,106 and conversion costs of $22,400 for November. All production is sold as it is produced. Required: a. Compute cost of goods sold for November. (Do not round intermediate calculations.) b. What is the value of work-in-process inventory on November 30? (Do not round intermediate calculations.) c. The president tells the controller that stock analysts expect higher income for the month and asks the controller to change the production manager's estimate about the ending work-in-process inventory. (1) In order to generate higher income, would the controller raise or lower the estimated percentage of completion on the ending work-in-process inventory? (2) What should the controller do?

Answer 1

Solution:

Given data,

Old Tyme production started for 10400 barrels in october, 31

Closing work in progress for 1400 barrels in november, 30

Completion of work in progress = 30 percent

Costs for november ;

Direct materials = $18106

Conversion costs = $22400

Now, we find the sold units = started barrels - closing work in progress

= 10400 - 1400

= 9000 barrels

And, work in progress :

Material ($18106 * 1400 / 10400) = $2437.34

Add : Conversion costs ( 20400 * 1400 / 10400 * 30%) = $823.84  

Total working progress for november 30 = $1,613.5

Now we find the values for given questions:

(a). Cost of goods sold for november :

Direct material = $18,106

Conversion costs = $22,400  

$40,506

Less: Work in progress = $ 1,613.5B

Cost of goods sold for november = $38,892.5

(b). work in progress inventory on november 30 :

In the Above calculations We also calculated work in progress for november 30

So, the Work in progress for november 30 = $1,613.5

(c) 1. The controller would have  Raise the percentage of complettion

2. The controller should Raise the estimates