Question

The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.

	April 30				May 31
Inventories
Raw materials	$	32,000			$	40,000
Work in process		9,500				20,100
Finished goods		54,000				34,900
Activities and information for May
Raw materials purchases (paid with cash)						197,000
Factory payroll (paid with cash)						200,000
Factory overhead
Indirect materials						15,000
Indirect labor						46,000
Other overhead costs						106,000
Sales (received in cash)						1,300,000
Predetermined overhead rate based on direct labor cost						55	%

Compute the following amounts for the month of May using T-accounts.

1. Cost of direct materials used.
2. Cost of direct labor used.
3. Cost of goods manufactured.
4. Cost of goods sold.*
5. Gross profit.
6. Overapplied or underapplied overhead.

1. Raw materials purchases for cash.
2. Direct materials usage.
3. Indirect materials usage.

  
Prepare journal entries for the above transactions for the month of May.

1. Direct labor usage.
2. Indirect labor usage.
3. Total payroll paid in cash.

Prepare journal entries for the above transactions for the month of May.

1. Incurred other overhead costs (record credit to Other Accounts).
2. Applied overhead to work in process.

Prepare journal entries for the above transactions for the month of May.

Answer 1

	Raw materials (RM)						Work in Process (WIP)
RM-April 30	32000					WIP-April 30	9500
RM purchases	197000					DM used	174000
		15000	Indirect materials			DL used	154000
		174000	DM used			Overhead applied	84700	402100	Cost of goods manuf.
RM-May 31	40000					WIP-May 31	20100
	Finished goods (FG)						Factory Overhead
FG-April 30	54000					Indirect materials	15000	84700	Overhead applied
Cost of goods manuf.	402100					Indirect labor	46000
		421200	Cost of goods sold			Other overhead costs	106000
FG-May 31	34900
						Underapplied OH	82300
Income Statement (Partial)
Sales	1300000
Cost of goods sold	421200
Gross Profit	878800
2
For Raw materials:
General journal	Debit	Credit
Raw materials inventory	197000
Cash		197000
Work in Process inventory	174000
Raw materials inventory		174000
Factory overhead	15000
Raw materials inventory		15000
3
For Labor:
General journal	Debit	Credit
Work in Process inventory	154000		=200000-46000
Factory wages payable		154000
Factory overhead	46000
Factory wages payable		46000
Factory wages payable	200000
Cash		200000
4
For overhead:
General journal	Debit	Credit
Factory overhead	106000
Other accounts		106000
Work in Process inventory	84700		=(200000-46000)*55%
Factory overhead		84700