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		183,500			130,500
Work in process inventory—Stitching		203,300			103,900
Finished goods inventory		48,100			36,250

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

Direct materials
Raw materials purchased on credit	$	95,000
Direct materials used—Cutting		25,250
Direct materials used—Stitching		0

Direct labor
Direct labor—Cutting	$	22,600
Direct labor—Stitching		90,400
Total factory payroll paid (in cash)		170,800

Factory Overhead (Actual costs)
Indirect materials used	$	54,000
Indirect labor used		57,800
Other overhead costs		61,000

Factory Overhead Rates
Cutting	(150% of direct materials used			)
Stitching	(120% of direct labor used			)
Sales	$816,000

Problem 20-1A Part 1

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) production costs transferred from Cutting to Stitching,	$165845
	Work in process-Cutting Beginning bal+Direct material+direct labor+Manufactuirng overhead-ending WIP balance
	(183500+22600+25250+64955-130500)	165845
	Calcualtion of manufactirng overhead
	Work In process Inventory_cutting (150%*2520)+(120%22600)	64995
	b) production costs transferred from Stitching to finished goods,	$298280
	Work in process-Stiching Beginning bal+Direct material+direct labor+Manufactuirng overhead-ending WIP balance-stitching
	203300+0+90400+108480-103900	298280
	Calcualtion of manufactirng overhead
	Work In process Inventory-Stiching (90400*120%)	108480
	c) cost of good sold	310130
	Bginning Finished goods inventory+COGM-Ending Finished goods inventory
	(48100+298280-36250)	310130

Information from which the answers calculated

	Beginning Inventory	Ending inventory
Work In process Inventory-Cutting	183500	130500
Work In process Inventory-Stiching	203300	103900
Finished Goods iNventory	48100	36250
Raw material Purchased	95000
Direct material used-Cutting	25250
Direct material used-Stiching	0
Direct labor -cutting	22600
Direct labor -Stiching	90400
Total direct labor F	113000
Total factory paid T	170800
Actual cost
Indirect material	54000
Indirect labor	57800
Other	61000
Total	172800
Factory overhead rate for Cutting	150% of Direct material used
Factory overhead rate for Stiching	120% of direct labor used