Question

Problem 02-1A Production costs computed and recorded; reports prepared LO P1, P2, P3, P4

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Marcelino Co.'s March 31 inventory of raw materials is $87,000. Raw materials purchases in April are $550,000, and factory payroll cost in April is $388,000. Overhead costs incurred in April are: indirect materials, $50,000; indirect labor, $30,000; factory rent, $36,000; factory utilities, $25,000; and factory equipment depreciation, $60,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $690,000 cash in April. Costs of the three jobs worked on in April follow.

	Job 306				Job 307				Job 308
Balances on March 31
Direct materials		$	27,000			$	41,000
Direct labor			23,000				18,000
Applied overhead			11,500				9,000
Costs during April
Direct materials			139,000				215,000			$	100,000
Direct labor			104,000				152,000				102,000
Applied overhead			?				?				?
Status on April 30	Finished (sold)				Finished (unsold)					In process

Problem 02-1A Part 1

Required:
1. Determine the total of each production cost incurred for April (direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including the balances from March 31).

Problem 02-1A Part 2

1. Materials purchases (on credit).
2. Direct materials used in production.
3. Direct labor paid and assigned to Work in Process Inventory.
4. Indirect labor paid and assigned to Factory Overhead.
5. Overhead costs applied to Work in Process Inventory.
6. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
7. Transfer of Jobs 306 and 307 to Finished Goods Inventory.
8. Cost of goods sold for Job 306.
9. Revenue from the sale of Job 306.
10. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

2. Prepare journal entries for the month of April to record the above transactions.

Problem 02-1A Part 3

3. Prepare a schedule of cost of goods manufactured.
4-a. Compute gross profit for April.
4-b. Show how to present the inventories on the April 30 balance sheet.

Answer 1

1
	Job 306	Job 307	Job 308	April Total
From March
Direct Materials	27000	41000		68000
Direct Labor	23000	18000		41000
Applied overhead	11500	9000		20500
Beginning goods in process	61500	68000	0	129500
For April
Direct Materials	139000	215000	100000	454000
Direct Labor	104000	152000	102000	358000
Applied overhead	52000	76000	51000	179000
Total costs added in April	295000	443000	253000	991000
Total costs (April 30)	356500	511000	253000	1120500
Status on April 30	Finished (sold)	Finished (unsold)	In process
April 30 cost included in:	Cost of goods sold	Finished goods inventory	Goods in process inventory
2
	General Journal	Debit	Credit
1	Raw materials inventory	550000
	Accounts Payable		550000
2	Work in Process inventory	454000
	Raw materials inventory		454000
3	Work in Process inventory	358000
	Cash		358000
4	Factory overhead	30000
	Cash		30000
5	Work in Process inventory	179000
	Factory overhead		179000
6	Factory overhead	50000
	Raw materials inventory		50000
7	Factory overhead	25000
	Cash		25000
8	Factory overhead	60000
	Accumulated depreciation -factory equipment		60000
9	Factory overhead	36000
	Cash		36000
10	Finished goods inventory	867500
	Work in Process inventory		867500
11	Cost of goods sold	356500
	Finished goods inventory		356500
12	Cash	690000
	Sales		690000
13	Cost of goods sold	22000
	Factory overhead		22000
3
Schedule of cost of goods manufactured
For month ended April 30
Direct materials used	454000
Direct labor used	358000
Factory overhead applied	179000
Total manufacturing costs	991000
Add: Work in Process, March 31	129500
Total cost of work in Process	1120500
Less: Work in Process, April 30	253000
Cost of goods manufactured	867500
4a
Gross Profit	311500
4b
Inventories
Raw materials	133000	=87000+550000-454000-50000
Work in Process	253000
Finished goods	511000
Total inventories	897000
Workings:
Actual factory overhead:
Indirect materials	50000
Indirect labor	30000
Factory rent	36000
Factory utilities	25000
Factory depreciation equipment	60000
Actual factory overhead	201000
Applied overhead	179000
Underapplied overhead	22000
Sales	690000
Less: Cost of goods sold	356500
Less: Underapplied overhead	22000
Gross Profit	311500