Question

Selected ledger accounts for Realm Company are given below for the just-completed year:

Raw Materials

Manufacturing Overhead

Bal. 1/1                   41,000		Credits                        ?		Debits                427,400		Credits                         ?
Debits                   475,000
Bal. 31/12               82,000

    

Work in Process

Factory Wages Payable

Bal. 1/1                 86,500		Credits              904,100		Debits               206,500		Bal. 1/1                 21,000
Direct materials    342,000						Credits                202,500
Direct labour         132,000
Overhead              444,600						Bal. 31/12               17,000
Bal. 31/12                  ?

     

Finished Goods

Cost of Goods Sold

Bal. 1/1                  59,800		Credit                        ?		Debits                        ?
Debits                        ?
Bal. 31/12             163,000

    

Required:

1.	What was the cost of raw materials put into production during the year?

      

2.	How much of the materials in requirement 1 consisted of indirect materials?

      

3.	How much of the factory labour cost for the year consisted of indirect labour?

      

4.	What was the cost of goods manufactured for the year?

      

5.	What was the cost of goods sold for the year (before considering underapplied or overapplied overhead)?

      

6.	If overhead is applied to production on the basis of direct materials cost, what rate was in effect during the year?

      

7.	Was manufacturing overhead underapplied or overapplied? By how much?

      

8.	Compute the ending balance in the Work in Process inventory account. Assume that this balance consists entirely of goods started during the year. If $33,100 of this balance is direct materials cost, how much of it is direct labour cost? Manufacturing overhead cost?

Answer 1

1. the cost of raw materials put into production during the year = 41000+475000-82000 = 434000

2.the materials in requirement 1 consisted of indirect materials = Total raw material used-Direct material

= 434000-342000

Indirect material used = 92000

3. factory labour cost for the year consisted of indirect labour = 202500-132000 = 70500

4. Cost of goods manufactured = 904100

5. Cost of goods sold = 59800+904100-163000 = 800900

6. If overhead is applied to production on the basis of direct materials cost, what rate was in effect during the year?

Overhead rate = 444600*100/342000 = 130% of direct material cost

7. Over/under applied overhead = Applied overhead-actual overhead

= 444600-427400

Over applied overhead = 17200

8. Ending balance = (86500+342000+132000+444600)-904100 = 101000

Direct material = 33100

Manufacturing overhead = (33100*130%) = 43030

Direct labour = (101000-33100-43030) = 24870