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Question 3 – Better Than That, Co. provides the following information: October 31 inventory of raw...

Question 3 – Better Than That, Co. provides the following information:

  • October 31 inventory of raw materials is $35,000.
  • Raw materials purchases in November are $240,000.
  • Total factory payroll cost (includes both direct and indirect labor) in November is $105,850.
  • Actual factory overhead costs incurred in November are as follows: indirect materials, $15,900; indirect labor, $9,000; factory rent, $25,000; factory utilities, $23,880; and factory equipment depreciation, $42,000.
  • The predetermined overhead rate is 120% of direct labor cost.
  • Job L5 is sold to a customer in November for $255,000 on account.
  • Costs related to the three jobs worked on in November follow.

Job J1

Job L5

Job T2

Balances on October 31

:

Direct materials

$

0

$

0

$ 19,500

Direct labor

0

0

$6,850

Applied overhead

0

0

$8,220

Costs during November:

Direct materials

56,400

101,800

$

72,100

Direct labor

22,550

45,600

28,700

Applied overhead

?

?

?

Status on November 30

In process

Finished (sold)

Finished (unsold)

  1. Determine:
    1. The WIP inventory account balance as of October 31st.
    2. Total direct materials cost for November
    3. Total direct labor cost for November
    4. Total Applied factory OH cost for November
    5. The total costs assigned to each job as of November 30th (including any balances from October 31).
  2. Prepare journal entries for the month of November to record the below transactions (make sure to use proper journal entry formatting and include a brief description of each entry).
  1. Raw materials purchases (on credit).
  2. Direct materials used in production.
  3. Direct labor paid in cash and assigned to Work in Process Inventory.
  4. Overhead costs applied to Work in Process Inventory.
  5. Indirect materials used and assigned to Factory Overhead.
  6. Indirect labor paid in cash and assigned to Factory Overhead.
  7. Actual other overhead costs incurred (assume Factory rent and utilities are paid in cash).
  8. Transfer of Jobs L5 and T2 to Finished Goods Inventory.
  9. Revenue from the sale of Job L5.
  10. Cost of goods sold for Job L5.
  11. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account (Assume the amount is not material).
  1. Determine the November 30th balances of the firm’s three inventory accounts:
    1. raw materials inventory account
    2. WIP inventory account
    3. finished goods inventory account (assume finished goods inventory balance as of October 31st was $0).
  2. Prepare a schedule of cost of goods manufactured for November.
  3. Calculate the firm’s gross profit for November.

(I only need c,d, & e answered)

Solutions

Expert Solution

a. WIP inventory balance on October 31st: $ 34,570

Total direct materials cost for November: $ 230,300

Total direct labor cost for November : $ 96,850

Applied OH cost for November : $ 116,220

Job J1 Job L5 Job T2
Total Cost Assigned $ 106,010 $ 202,120 $ 169,810

b.

Transaction General Journal Debit Credit
$ $
1. Raw Materials Inventory 240,000
Accounts Payable 240,000
Raw materials purchased on credit
2. Work in Process Inventory 230,300
Raw Materials Inventory 230,300
Direct materials used in production
3. Work in Process Inventory 96,850
Cash 96,850
Direct labor paid in cash and assigned to work in process inventory
4. Work in Process Inventory 116,220
Factory Overhead 116,220
Overhead costs applied to work in process inventory
5. Factory Overhead 15,900
Raw Materials Inventory 15,900
Indirect materials used and assigned to factory overhead
6. Factory Overhead 9,000
Cash 9,000
Indirect labor paid in cash and assigned to factory overhead
7. Factory Overhead 90,880
Accumulated Depreciation 42,000
Cash 48,880
Other overheads incurred
8. Finished Goods Inventory 371,930
Work in Process Inventory 371,930
Transfer of jobs to finished goods inventory
9. a. Accounts Receivable 255,000
Sales Revenue 255,000
Revenue from sale of job L5
9.b. Cost of Goods Sold 202,120
Finished Goods Inventory 202,120
Cost of goods sold
10 Factory Overhead 440
Cost of Goods Sold 440
Assignment of overapplied factory overhead to cost of goods sold

c.

November 30th balance
Raw Materials Inventory $ 28,800
Work in Process Inventory 106,010
Finished Goods Inventory 169,810

d.

Schedule of Cost of Goods Manufactured
For the month ended November 30
Beginning work in process inventory $ 34,570
Add: Manufacturing costs incurred during November
Direct materials 230,300
Direct labor 96,850
Factory overhead applied 116,220
Total Manufacturing Costs 443,370
Total Cost of Work in Process 477,940
Less: Ending work in process inventory (106,010)
Cost of Goods Manufactured $ 371,930

e.

Income Statement
For the month ended November 30
Sales Revenue $ 255,000
Less: Cost of Goods Sold 201,680
Gross Profit $ 53,320

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