Question

In: Accounting

The company Perfume Collection presents the following information regarding the initial inventory of products in process...

The company Perfume Collection presents the following information

regarding the initial inventory of products in process for the month of June 2014:

No.Order Direct raw material Direct labor Manufacturinf Overhead
340 $15000 $8000 $12000
408 $11500 $10000 $9000
433 $19000 $13000 $15000
During the month of June, costs of direct materials and direct
 labor are incurred for the following orders:
No. order Direct Raw material Direct labor
340 $4000
360 $10000 6000
408 5000
433 7000
450 $12000 5500
503 $16000 8000
Indirect manufacturing costs are applied at a rate of 130% of 
the cost of direct labor. All the orders that were kept in the 
inventory of process products at the beginning of the month 
were finished and sold with a margin of 35% over the cost of 
production.
It is asked to calculate:
a) Cost of production of each of the orders.
b) Prepare a statement of results to know the gross profit obtained
c) Balance of the final inventory of products in process

Solutions

Expert Solution

Solution:

Part 1 --- Cost of Production of each order

Job

Total

340

360

408

433

450

503

Beginning Inventory

$35,000

$0

$30,500

$47,000

$112,500

Plus: Cost incurred during the period

$0

Direct Materials

$4,000

$10,000

$0

$0

$12,000

$16,000

$42,000

Direct labor

$0

$6,000

$5,000

$7,000

$5,500

$8,000

$31,500

Applied Manufacturing Overhead (130% of direct labor cost)

$0

$7,800

$6,500

$9,100

$7,150

$10,400

$40,950

Total cost of production

$39,000

$23,800

$42,000

$63,100

$24,650

$34,400

$226,950

Part 2 – Gross Profit Obtained

The beginning orders are completed during the period.

Job

Total

340

408

433

Beginning Inventory

$35,000

$30,500

$47,000

$112,500

Plus: Cost incurred during the period

Direct Materials

$4,000

$0

$0

$4,000

Direct labor

$0

$5,000

$7,000

$12,000

Applied Manufacturing Overhead (130% of direct labor cost)

$0

$6,500

$9,100

$15,600

Total cost of production

$39,000

$42,000

$63,100

$144,100

Add: Profit 35% of Total Cost

$13,650

$14,700

$22,085

$50,435

Total Sales Revenue

$52,650

$56,700

$85,185

$194,535

Part 3 – balance of the final inventory of product in process

All the orders except 340, 408 and 433 is ending inventory.

Job

Total

360

450

503

Beginning Inventory

$0

Plus: Cost incurred during the period

Direct Materials

$10,000

$12,000

$16,000

Direct labor

$6,000

$5,500

$8,000

Applied Manufacturing Overhead (130% of direct labor cost)

$7,800

$7,150

$10,400

Total cost of production

$23,800

$24,650

$34,400

$82,850

Final Inventory of Product in Process = $82,850

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


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