Question

Sierra Company manufactures soccer balls in two sequential processes: Cutting and Stitching. All direct materials enter production at the beginning of the Cutting process. The following information is available regarding its May inventories:

	Beginning Inventory			Ending Inventory
Work in process inventory—Cutting		103,500			90,500
Work in process inventory—Stitching		123,300			79,100
Finished goods inventory		32,100			20,250

The following additional information describes the company's production activities for May.

Direct materials
Raw materials purchased on credit	$	55,000
Direct materials used—Cutting		23,250
Direct materials used—Stitching		0

Direct labor
Direct labor—Cutting	$	18,600
Direct labor—Stitching		74,400
Total factory payroll paid (in cash)		149,200

Factory Overhead (Actual costs)
Indirect materials used	$	25,200
Indirect labor used		56,200
Other overhead costs		53,000

Factory Overhead Rates
Cutting	(150% of direct materials used	)
Stitching	(120% of direct labor used	)
Sales	$496,000

Required:
1. Compute the amount of (a) production costs transferred from Cutting to Stitching, (b) production costs transferred from Stitching to finished goods, and (c) cost of goods sold.

Answer 1

A) Cost of goods manufacturing (Cutting) for the month of May

Direct materials	$23,250
Add: Direct Labor	$18,600
Add: Factory overheads ($23,250×150%)	$34,875
Total manufacturing costs added during may	$76,725
Add: Beginning WIP	$103,500
Total cost of WIP	$180,225
Less: Ending WIP	($90,500)
Cost of goods manufactured transferred to stitching	$89,725

B) Cost of goods manufacturing (Stitching) for the month of May

Transferred from Cutting	$89,725
Add: Direct Labor	$74,400
Add: Factory overhead ($74,400×120%)	$89,280
Total manufacturing costs during may	$253,405
Add: Beginning WIP	$123,300
Total cost of WIP	$376,705
Less: Ending WIP	($79,100)
Cost of goods manufactured	$297,605

C) Cost of goods sold

Cost of goods manufactured	$297,605
Add: Beginning Finished goods	$32,100
Cost of goods available for sale	$329,705
Less: Closing Finished goods	($20,250)
Cost of goods sold	$309,455

_____×_____

All the best