Question

Problem 2-1A Production costs computed and recorded; reports prepared LO C2, P1, P2, P3, P4

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Marcelino Co.'s March 31 inventory of raw materials is $84,000. Raw materials purchases in April are $540,000, and factory payroll cost in April is $364,000. Overhead costs incurred in April are: indirect materials, $59,000; indirect labor, $26,000; factory rent, $38,000; factory utilities, $19,000; and factory equipment depreciation, $58,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $670,000 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		$	30,000			$	36,000
Direct labor			25,000				14,000
Applied overhead			12,500				7,000
Costs during April
Direct materials			133,000				210,000			$	100,000
Direct labor			105,000				150,000				101,000
Applied overhead			?				?				?
Status on April 30	Finished (sold)				Finished (unsold)					In process

Problem

Required:
1. Determine the total of each production cost incurred for April (direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including the balances from March 31).

a-Materials purchases (on credit).

b-Direct materials used in production.

c-Direct labor paid and assigned to Work in Process Inventory.

d-Indirect labor paid and assigned to Factory Overhead.

e-Overhead costs applied to Work in Process Inventory.

f-Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)

g-Transfer of Jobs 306 and 307 to Finished Goods Inventory.

h-Cost of goods sold for Job 306.

i-Revenue from the sale of Job 306.

j-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.

4.1 Compute gross profit for April.

4.2 Show how to present the inventories on the April 30 balance sheet.

Answer 1

			Job 306	Job 307	Job 308	April
1)						total
From March
Direct materials			30,000	36,000	0	66,000
Direct labor			25,000	14,000	0	39,000
applied overhead			12,500	7,000	0	19,500
Beginning goods in process			67,500	57,000	0	124,500
For April
Direct materials			133,000	210,000	100,000	443,000
Direct labor			105,000	150,000	101,000	356,000
applied overhead			52500	75000	50500	178,000
Total costs added in April			290,500	435,000	251,500	977,000
total costs (April 30)			358,000	492,000	251,500	1,101,500
Satus on april 30			fin(sold)	fin(unsold)	in process
April costs included in :			COGS	finished	WIP
				goods
				inventory
2)	TR	General journal				Debit	Credit
	a.	Raw materials inventory				540,000
		Accounts payable					540,000
	b.	Work in process inventory				443,000
		Raw materials inventory					443,000
	c.	Work in process inventory				356,000
		Cash					356,000
	d.	Factory overhead				26,000
		cash					26,000
	e.	Factory overhead				178,000
		work in process inventory					178,000
	f.	Factory overhead				174,000
		Raw materials inventory					59,000
		Cash					57,000
		Accumulated Depreciation					58,000
	g.	finished goods inventory				850,000
		Work in process inventory					850,000
	h.	Cost of goods sold				358,000
		finished goods inventory					358,000
	i.	Cash				670,000
		sales					670,000
	j.	cost of goods sold				22,000
		Factory overhead					22,000
3)		Schedule of goods of goods manufactured
		direct materials used					443,000
		Direct labor used					356,000
		factory overhead applied					178,000
		total manufacturing costs					977,000
		Add:work in process March 31					124,500
		total cost of work in process					1,101,500
		less:work in process April 30					251,500
		cost of goods manufactured					850,000
4)		Gross profit
		sales				670,000
		less cost of goods sold				380,000
		Gross profit				290,000
5)		inventories
		Raw materials				122,000
		work in process				251,500
		finished goods				492,000
		total inventories				865,500