Question

Comprehensive Problem Major League Bat Company

Major League Bat Company manufactures baseball bats. In addition to its work in process inventories, the company maintains inventories of raw materials and finished goods. It uses raw materials as direct materials in production and as indirect materials. Its factory payroll costs include direct labor for production and indirect labor. All materials are added at the beginning of the process, and conversion costs are applied uniformly throughout the production process.

Required:

You are to maintain records and produce measures of inventories to reflect the July events of this company. The June 30 balances: Raw Materials Inventory, $28,000; Work in Process Inventory, $7,910 ($3,110 of direct materials and $4,800 of conversion); Finished Goods Inventory, $200,000; Sales, $0; Cost of Goods Sold, $0; Factory Payroll Payable, $0; and Factory Overhead, $0.

1. Prepare journal entries to record the following July transactions and events.

Purchased raw materials for $160,000 cash (the company uses a perpetual inventory system).

Used raw materials as follows: direct materials, $94,240; and indirect materials, $14,500.

Recorded factory payroll payable costs as follows: direct labor, $213,500; and indirect labor, $29,500.

Paid factory payroll cost of $243,000 with cash (ignore taxes).

Incurred additional factory overhead costs of $89,000 paid in cash.

Allocated factory overhead to production at 50% of direct labor costs.

2. Information about the July inventories follows. Use this information with that from part 1 to prepare a process cost summary, assuming the weighted-average method is used. (Round "Cost per EUP" to 2 decimal places.)

     

Units
Beginning inventory	9,500	units
Started	20,000	units
Ending inventory	14,000	units
Beginning inventory
Materials—Percent complete	100	%
Conversion—Percent complete	80	%
Ending inventory
Materials—Percent complete	100	%
Conversion—Percent complete	30	%

     
    

3. Using the results from part 2 and the available information, make computations and prepare journal entries to record the following:

Total costs transferred to finished goods for July.

Sale of finished goods costing $288,200 for $670,000 in cash.

4. Post entries from parts 1 and 3 to the following general ledger accounts.



5. Compute the amount of gross profit from the sales in July. (Add any underapplied overhead to, or deduct any overapplied overhead from, the cost of goods sold.)

Answer 1

Formula sheet

A1	B	C	D	E	F	G	H
2	1)
3
4	Journal entry for purchase of raw materials
5	Account	Debit	Credit
6	Raw Materials Inventory	160000
7	Account Payable		=C6
8
9
10	Journal entry for raw material expense:
11	Account and Explanation	Debit	Credit
12	Work in Progress Inventory	94240
13	Manufacturing overhead	14500
14	Raw Materials Inventory		=C12+C13
15
16
17	Journal entry for Labor costs:
18	Account and Explanation	Debit	Credit
19	Work in Progress Inventory	213500
20	Manufacturing overhead	29500
21	Wage Payable		=C19+C20
22
23	Journal entry for payment of wages:
24	Account and Explanation	Debit	Credit
25	Wage Payable	=D21
26	Cash		=C25
27
28	Journal entry for Depreciation:
29	Account and Explanation	Debit	Credit
30	Manufacturing overhead	89000
31	Cash		=C30
32
33
34	Journal entry to allocate overheads
35	Account and Explanation	Debit	Credit
36	Work in process Inventory	=D37+D38
37	Manufacturing overhead		=C19*50%	=C19*50%
38
39	2)
40
41	Beginning Inventory	9500
42	Started during the period	20000
43	Total units to account for	=C41+C42
44	Units Transferred	=C43-C45
45	Ending inventory	14000
46
47	Equivalent units (EU) - Weighted average method
48		Units	% Materials	Materials -EU	% Conversion	Conversion-EU
49	Units Completed and Transferred out	=C44	1	=C49*D49	1	=C49*F49
50	Units in ending inventory	=C45	1	=C50*D50	0.3	=C50*F50
51	Equivalent units of production	=SUM(C49:C50)		=SUM(E49:E50)		=SUM(G49:G50)
52	Cost per equivalent units of production			Materials		Conversion
53	Costs of the beginning inventory			3110		4800
54	Cost incurred in this period			=C12		=C19+C36
55	Total Costs			=E53+E54		=G53+G54
56	Equivalent units of production			=E51		=G51
57	Cost per equivalent units of production			=E55/E56		=G55/G56
58	Total Cost accounted for:
59	Materials Cost in Beginning inventory	=E53
60	Conversion costs in Beginning inventory	=G53
61	Materials cost in this period	=E54
62	Conversion costs in this period	=G54
63	Total Cost to account for:	=SUM(C59:C62)
64
65	Cost Assignment and Reconciliation
66	Cost of units transferred out	Equivalent Units	Cost per EU	Total Cost
67	Direct Materials	=E49	=E57	=C67*D67
68	Conversion	=G49	=G57	=C68*D68
69	Total cost transferred out			=SUM(E67:E68)
70	Cost of ending inventory	Equivalent Units	Cost per EU	Total Cost
71	Direct Materials	=E50	=E57	=C71*D71
72	Conversion	=G50	=G57	=C72*D72
73	Total cost of ending work in progress			=SUM(E71:E72)
74	Total Cost accounted for:				=E69+E73
75
76