Question

Marcelino Co.'s March 31 inventory of raw materials is $90,000. Raw materials purchases in April are $530,000, and factory payroll cost in April is $381,000. Overhead costs incurred in April are: indirect materials, $53,000; indirect labor, $21,000; factory rent, $30,000; factory utilities, $19,000; and factory equipment depreciation, $56,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $635,000 cash in April. Costs of the three jobs worked on in April follow.

	Job 306				Job 307				Job 308
Balances on March 31
Direct materials		$	26,000			$	40,000
Direct labor			21,000				15,000
Applied overhead			10,500				7,500
Costs during April
Direct materials			132,000				210,000			$	115,000
Direct labor			102,000				154,000				104,000
Applied overhead			?				?				?
Status on April 30	Finished (sold)				Finished (unsold)					In process

1. Materials purchases (on credit).
2. Direct materials used in production.
3. Direct labor paid and assigned to Work in Process Inventory.
4. Indirect labor paid and assigned to Factory Overhead.
5. Overhead costs applied to Work in Process Inventory.
6. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
7. Transfer of Jobs 306 and 307 to Finished Goods Inventory.
8. Cost of goods sold for Job 306.
9. Revenue from the sale of Job 306.
10. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

2. Prepare journal entries for the month of April to record the above transactions.
3. Prepare a schedule of cost of goods manufactured.
4-a. Compute gross profit for April.
4-b. Show how to present the inventories on the April 30 balance sheet.

Answer 1

	Job 306	Job 307	Job 308	April Total
From March
Direct Materials	26000	40000		66000
Direct Labor	21000	15000		36000
Applied overhead	10500	7500		18000
Beginning goods in process	57500	62500	0	120000
For April
Direct Materials	132000	210000	115000	457000
Direct Labor	102000	154000	104000	360000
Applied overhead	51000	77000	52000	180000
Total costs added in April	285000	441000	271000	997000
Total costs (April 30)	342500	503500	271000	1117000
Status on April 30	Finished (sold)	Finished (unsold)	In process
April 30 cost included in:	Cost of goods sold	Finished goods inventory	Goods in process inventory
2
	General Journal	Debit	Credit
1	Raw materials inventory	530000
	Accounts Payable		530000
2	Work in Process inventory	457000
	Raw materials inventory		457000
3	Work in Process inventory	360000
	Cash		360000
4	Factory overhead	21000
	Cash		21000
5	Work in Process inventory	180000
	Factory overhead		180000
6	Factory overhead	53000
	Raw materials inventory		53000
7	Factory overhead	19000
	Cash		19000
8	Factory overhead	56000
	Accumulated depreciation -factory equipment		56000
9	Factory overhead	30000
	Cash		30000
10	Finished goods inventory	846000
	Work in Process inventory		846000
11	Cost of goods sold	342500
	Finished goods inventory		342500
12	Cash	635000
	Sales		635000
13	Factory overhead	1000
	Cost of goods sold		1000
3
Schedule of cost of goods manufactured
For month ended April 30
Direct materials used	457000
Direct labor used	360000
Factory overhead applied	180000
Total manufacturing costs	997000
Add: Work in Process, March 31	120000
Total cost of work in Process	1117000
Less: Work in Process, April 30	271000
Cost of goods manufactured	846000
4a
Gross Profit	293500
4b
Inventories
Raw materials	110000	=90000+530000-457000-53000
Work in Process	271000
Finished goods	503500
Total inventories	884500
Workings:
Actual factory overhead:
Indirect materials	53000
Indirect labor	21000
Factory rent	30000
Factory utilities	19000
Factory depreciation equipment	56000
Actual factory overhead	179000
Applied overhead	180000
Overapplied overhead	1000
Sales	635000
Less: Cost of goods sold	342500
Add: Overapplied overhead	1000
Gross Profit	293500