Question

Smith Company manufactures lawn mowers.  The firm had the following inventories.

          Jan 1, 2017     Dec 3, 2017

                        Finished goods                        $142,000         $  92,000

                        Work in process                      $262,000         $426,000

                        Materials                                 $114,000         $ 90,000

            The following additional manufacturing data pertains to operations.

            Material purchased                  $150,000         Property Taxes Factory           $ 7,500

            Direct labor                             $400,000         Utilities-Factory                      $15,000

            Depreciation-Factory Equip    $  25,000         Insurance-Factory                   $  4,500

            Factory Supervisor Salaries    $227,500         Selling and Admin Expense    $200,000

Alex Company applies manufacturing overhead at the rate of 60 percent of direct-labor cost.  

            Required:

            Compute the following amounts for the year of 2017.

A. Alex Company’s direct materials cost.

B. Alex Company’s total manufacturing costs for 2017.

C. Alex Company’s cost of goods manufactured.

D. Alex Company’s cost of goods sold (before disposing of under/over-applied overhead).

E. Assume Alex Company wants to achieve a Gross Profit of 30% of Sales -- Compute the total dollar amount of Sales needed.

F. Show Alex Company's Income Statement

G. Was overhead under or over applied and by how much?

H. What effect, if any, will the amount in G have on net income. Explain and show the computation.

I. Why does overhead need to be applied?  Explain.

J. If Alex estimated overhead for the year to be $252,000, what amount was the original estimate for direct labor cost?

Please show how you get the answers. The first two I kind of get, the rest of them are in an entirely different world.

Answer 1

Solution:

Part A -- Alex Company’s direct materials cost = $174,000

Cost of Direct Materials used in production
Beginning Inventory - Direct Materials	$114,000
Plus: Materials Purchased	$150,000
Less: Ending Inventory - Direct Materials	-$90,000
Cost of Direct materials used in production	$174,000

B. Alex Company’s total manufacturing costs for 2017 = $814,000

Total Manufacturing Costs	$$
Cost of Direct materials used	$174,000
Plus: Direct Labor	$400,000
Plus: Applied Manufacturing Overhead (60% of Direct Labor Cost 400,000)	$240,000
Total Manufacturing Costs	$814,000

C. Alex Company’s cost of goods manufactured = $650,000

Cost of goods manufactured	$$
Total Manufacturing Costs	$814,000
Plus: Beginning Work In Process	$262,000
	$1,076,000
Less: Ending Work in Process	-$426,000
Cost of Goods manufactured	$650,000

D. Alex Company’s cost of goods sold (before disposing of under/over-applied overhead) = $700,000

Cost of Goods Sold (before disposing of under/over-applied overhead)	$$
Cost of Goods manufactured	$650,000
Plus: Beginning Finished Goods Inventory	$142,000
Total Cost of Goods Available for sale	$792,000
Less: Ending Finished Goods Inventory	-$92,000
Cost of Goods Sold	$700,000

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts