Question

Major League Bat Company manufactures baseball bats. In addition to its work in process inventories, the company maintains inventories of raw materials and finished goods. It uses raw materials as direct materials in production and as indirect materials. Its factory payroll costs include direct labor for production and indirect labor. All materials are added at the beginning of the process, and conversion costs are applied uniformly throughout the production process. Required: You are to maintain records and produce measures of inventories to reflect the July events of this company. The June 30 balances: Raw Materials Inventory, $22,000; Work in Process Inventory, $9,690 ($2,810 of direct materials and $6,880 of conversion); Finished Goods Inventory, $140,000; Sales, $0; Cost of Goods Sold, $0; Factory Payroll Payable, $0; and Factory Overhead, $0. 1. Prepare journal entries to record the following July transactions and events. Purchased raw materials for $130,000 cash (the company uses a perpetual inventory system). Used raw materials as follows: direct materials, $52,540; and indirect materials, $11,500. Recorded factory payroll payable costs as follows: direct labor, $206,000; and indirect labor, $26,500. Paid factory payroll cost of $232,500 with cash (ignore taxes). Incurred additional factory overhead costs of $83,000 paid in cash. Allocated factory overhead to production at 50% of direct labor costs. 2. Information about the July inventories follows. Use this information with that from part 1 to prepare a process cost summary, assuming the weighted-average method is used. (Round "Cost per EUP" to 2 decimal places.) Units Beginning inventory 6,500 units Started 14,000 units Ending inventory 8,000 units Beginning inventory Materials—Percent complete 100 % Conversion—Percent complete 80 % Ending inventory Materials—Percent complete 100 % Conversion—Percent complete 30 % 3. Using the results from part 2 and the available information, make computations and prepare journal entries to record the following: Total costs transferred to finished goods for July. Sale of finished goods costing $273,200 for $640,000 in cash. 4. Post entries from parts 1 and 3 to the following general ledger accounts Raw materials inventory, work in process inventory, finished goods inventory, factory wages payable, sales, cost of goods sold, factory overhead. 5. Compute the amount of gross profit from the sales in July. (Add any underapplied overhead to, or deduct any overapplied overhead from, the cost of goods sold.)

Answer 1

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Journal Entries
Date	Account	Debit	Credit
1	Raw material Inventory	$130,000
1	Cash		$130,000
	(to record purchase of raw material)
2	Work in Process Inventory	$ 52,540
2	Factory Overhead	$ 11,500
2	Raw material Inventory		$ 64,040
	(to record use of raw material)
3	Work in Process Inventory	$206,000
3	Factory Overhead	$ 26,500
3	Factory Wages Payable		$232,500
	(to record wages payable)
4	Factory Wages Payable	$232,500
4	Cash		$232,500
	(to record payment of wages)
5	Factory Overhead	$ 83,000
	Cash		$ 83,000
	(to record payment of overheads)
6	Work in Process Inventory (50% of 206000)	$103,000
	Factory Overhead		$103,000
	(To record allocation of overhead)
7	Finished Goods Inventory (Fro Eq Working)	$298,750
	Work in Process inventory		$298,750
	(to record transfer of finished goods)
8	Cash	$640,000
	Sales Revenue		$640,000
	(to record cash sale)
8	Cost of Goods sold	$273,200
	Finished Goods Inventory		$273,200
	(to record cost of goods sold)
9	Cost of Goods Sold	$ 18,000
	Factory Overhead		$ 18,000
	(to dispose of underapplied overhead)

Ledger
Raw Material Inventory
Debit		Credit
Beginning Balance	$    22,000	2	$ 64,040
1	$ 130,000
Ending Balance	$    87,960
Work in process inventory
Debit		Credit
Beginning Balance	$      9,690	7	$298,750
2	$    52,540
3	$ 206,000
6	$ 103,000
Finished Goods Inventory
Debit		Credit
Beginning Balance	$ 140,000	8	$273,200
7	$ 298,750
Ending Balance	$ 165,550
Factory Wages Payable
Debit		Credit
4	$ 232,500	3	$232,500
		Ending Balance	$           -
Sales
Debit		Credit
		8	$640,000
		Ending Balance	$640,000
Cost of Goods Sold
Debit		Credit
8	$ 273,200
9	$    18,000
Ending Balance	$ 291,200
Factory Overhead
Debit		Credit
2	$    11,500	6	$103,000
3	$    26,500	9	$ 18,000
5	$    83,000

A1.	Quantities			Equivalent Units
			Whole Units	Materials	Conversion Cost
	Units to be account for
	Work in Process, Beginning	100%, 80%	6500
	add:Started into production		14000
	-Total Units		20500
	Units accounted for
	Transferred out		12500	12500	12500
	Work in Process, Ending	100 and 30% complete	8000	8000	2400
	Equivalent Units-Weighted Average		20500	20500	14900
A2.	Cost
				Materials	Convsersion Cost	Total
	Work in Process, Beginning			$        2,810	$                   6,880	$           9,690
	add:Started into production			$      52,540	$               309,000	$       361,540
	Total Cost to account for			$      55,350	$               315,880	$       371,230
	Equivalent Units			20500	14900
	Unit Cost	Total Cost/Equivalent Units	A	$          2.70	$                   21.20	$           23.90
	Transferrd out Equi Units		B	12,500	12,500
	Cost of Units Transferrd to Finished Goods		A*B	$      33,750	$               265,000	$       298,750