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		153,500			115,500
Work in process inventory—Stitching		173,300			94,600
Finished goods inventory		42,100			30,250

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

Direct materials
Raw materials purchased on credit	$	80,000
Direct materials used—Cutting		24,500
Direct materials used—Stitching		0

Direct labor
Direct labor—Cutting	$	21,100
Direct labor—Stitching		84,400
Total factory payroll paid (in cash)		162,700

Factory Overhead (Actual costs)
Indirect materials used	$	43,200
Indirect labor used		57,200
Other overhead costs		58,000

Factory Overhead Rates
Cutting	(150% of direct materials used			)
Stitching	(120% of direct labor used			)
Sales	$696,000

rev: 01_28_2020_QC_CS-197408

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

2. Prepare summary journal entries dated May 31 to record the following production activities during May: (a) raw materials purchases, (b) direct materials usage, (c) indirect materials usage, (d) direct labor costs incurred, (e) indirect labor costs incurred, (f) payment of factory payroll, (g) other overhead costs, (credit Other Accounts), (h) overhead applied, (i) goods transferred from Cutting to Stitching, (j) goods transferred from Stitching to finished goods, (k) cost of goods sold, and (l) sales..

Answer 1

1)

a)	production costs transferred from Cutting to Stitching						$ 120,350.00
b)	production costs transferred from Stitching to finished goods						$ 384,730.00
c)	cost of goods sold						$ 396,580.00

2)

Journal Entries
Events	Particulars			Debit	Credit
a)	Raw Materials			$   80,000.00
	To Accounts Payable				$   80,000.00
b)	WIP- Cutting			$   24,500.00
	To Raw Materials				$   24,500.00
c)	Manu. OH			$   43,200.00
	To Raw Materials				$   43,200.00
d)	WIP- Cutting			$   21,100.00
	WIP- Stitching			$   84,400.00
	To Factory Payroll				$ 105,500.00
e)	Manu. OH			$   57,200.00
	To Factory Payroll				$   57,200.00
f)	Factory Payroll			$ 162,700.00
	To Cash				$ 162,700.00
g)	Manu. OH			$   58,000.00
	To Other Accounts				$   58,000.00
h)	WIP- Cutting			$   36,750.00
	WIP- Stitching			$ 101,280.00
	To Manu. OH				$ 138,030.00
i)	WIP- Stitching			$ 120,350.00
	To WIP- Cutting				$ 120,350.00
j)	Finished Goods			$ 384,730.00
	To WIP- Stitching				$ 384,730.00
k)	COGS			$ 396,580.00
	To Finished Goods				$ 396,580.00
l)	Accounts Receivable			$ 696,000.00
	To Sales				$ 696,000.00

Workings:

WIP - Cutting					WIP - Stitching
Beg. Bal	$ 153,500.00	WIP- Stitching	$ 120,350.00		Beg. Bal	$ 173,300.00	Fin. Goods	$ 384,730.00
D.M	$   24,500.00				WIP- Cutting	$ 120,350.00
D.L	$   21,100.00				D.L	$   84,400.00
Manu. OH	$   36,750.00	End. Bal	$ 115,500.00		Manu. OH	$ 101,280.00	End. Bal	$   94,600.00

Manu. OH					Finished Goods
Ind.M	$ 43,200.00	WIP- Cutting	$   36,750.00		Beg. Bal	$   42,100.00	COGS	$ 396,580.00
Ind.L	$ 57,200.00	WIP- Stitching	$ 101,280.00		WIP- Stitching	$ 384,730.00	End. Bal	$   30,250.00
Other OH	$ 58,000.00