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Pro-Weave manufactures stadium blankets by passing the products through a weaving department and a sewing department. The following information is available regarding its June inventories:

	Beginning Inventory			Ending Inventory
Raw materials inventory	$	126,000		$	257,000
Work in process inventory—Weaving		475,000			480,000
Work in process inventory—Sewing		620,000			795,000
Finished goods inventory		1,306,000			1,296,000

The following additional information describes the company’s manufacturing activities for June:

Raw materials purchases (on credit)	$	520,000
Factory payroll cost (paid in cash)		3,470,000
Other factory overhead cost (Other Accounts credited)		208,000
Materials used
Direct—Weaving	$	254,000
Direct—Sewing		114,000
Indirect		196,000
Labor used
Direct—Weaving	$	1,350,000
Direct—Sewing		370,000
Indirect		1,750,000
Overhead rates as a percent of direct labor
Weaving		90	%
Sewing		160	%
Sales (on credit)	$	5,200,000

1. Compute the (a) cost of products transferred from weaving to sewing, (b) cost of products transferred from sewing to finished goods, and (c) cost of goods sold.
2. Prepare journal entries dated June 30 to record (a) goods transferred from weaving to sewing, (b) goods transferred from sewing to finished goods, (c) sale of finished goods, and (d) cost of goods sold.

Answer 1

Solution:

1a) cost of products transferred from weaving to sewing

Particulars	Amount
Beginning inventory	$475,000
Add: Direct material	$254,000
Add: Direct labor	$1,350,000
Add: Manufacturing overhead ($1,350,000*9%)	$1,215,000
Total	$3,294,000
Less: Ending inventory	($480,000)
Transferred to sweing department	$2,814,000

1b) cost of products transferred from sewing to finished goods

Particulars	Amount
Beginning inventory	$620,000
Add:Transferred from sewing department	$2,814,000
Add: Direct material	$114,000
Add: Direct labor	$370,000
Add: Manufacturing overhead($370,000*160%)	$592,000
Total	$4,510,000
Less: Ending inventory	($795,000)
Transferred to finished goods inventory	$3,715,000

1c) cost of goods sold

Particulars	Amount
Beginning inventory	$1,306,000
Add:Transferred from sewing department	$3,715,000
Total	$5,021,000
Less: ending inventory	($1,296,000)
Cost of goods sold	$3,725,000

2) Journal entry:

No	Account title	Debit	Credit
a	Work in progress sewing department	$2,814,000
	work in progress weaving department		$2,814,000
b	Finished goods inventory	$3,715,000
	work in progress sewing department		$3,715,000
c	Accounts receivable	$5,200,000
	Sales revenue		$5,200,000
d	Cost of goods sold	$3,725,000
	Finished goods inventory		$3,725,000

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