Question

Marcelino Co.'s March 31 inventory of raw materials is $81,000. Raw materials purchases in April are $510,000, and factory payroll cost in April is $386,000. Overhead costs incurred in April are: indirect materials, $57,000; indirect labor, $29,000; factory rent, $32,000; factory utilities, $22,000; and factory equipment depreciation, $59,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $700,000 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		$	29,000			$	44,000
Direct labor			23,000				14,000
Applied overhead			11,500				7,000
Costs during April
Direct materials			136,000				205,000			$	110,000
Direct labor			101,000				153,000				103,000
Applied overhead			?				?				?
Status on April 30	Finished (sold)				Finished (unsold)					In process

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.
1. 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.

3. Prepare a schedule of cost of goods manufactured.

4.1 Compute gross profit for April.

4.2 Show how to present the inventories on the April 30 balance sheet.

Answer 1

	Job 306	Job 307	Job 308	April Total
From March
Direct Materials	29000	44000		73000
Direct Labor	23000	14000		37000
Applied overhead	11500	7000		18500
Beginning goods in process	63500	65000	0	128500
For April
Direct Materials	136000	205000	110000	451000
Direct Labor	101000	153000	103000	357000
Applied overhead	50500	76500	51500	178500
Total costs added in April	287500	434500	264500	986500
Total costs (April 30)	351000	499500	264500	1115000
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
		Debit	Credit
1	Raw materials inventory	510000
	Accounts Payable		510000
2	Work in Process inventory	451000
	Raw materials inventory		451000
3	Work in Process inventory	357000
	Cash		357000
4	Factory overhead	29000
	Cash		29000
5	Work in Process inventory	178500
	Factory overhead		178500
6	Factory overhead	57000
	Raw materials inventory		57000
7	Factory overhead	22000
	Cash		22000
8	Factory overhead	59000
	Accumulated depreciation -factory equipment		59000
9	Factory overhead	32000
	Cash		32000
10	Finished goods inventory	850500
	Work in Process inventory		850500
11	Cost of goods sold	351000
	Finished goods inventory		351000
12	Cash	700000
	Sales		700000
13	Cost of goods sold	20500
	Factory overhead		20500
3
Schedule of cost of goods manufactured
For month ended April 30
Direct materials used	451000
Direct labor used	357000
Factory overhead applied	178500
Total manufacturing costs	986500
Add: Work in Process, March 31	128500
Total cost of work in Process	1115000
Less: Work in Process, April 30	264500
Cost of goods manufactured	850500
4.1
Gross Profit	328500
4.2
Inventories
Raw materials	83000	=81000+510000-451000-57000
Work in Process	264500
Finished goods	499500
Total inventories	847000
Workings:
Actual factory overhead:
Indirect materials	57000
Indirect labor	29000
Factory rent	32000
Factory utilities	22000
Factory depreciation equipment	59000
Actual factory overhead	199000
Applied overhead	178500
Underapplied overhead	20500
Sales	700000
Less: Cost of goods sold	351000
Less: Underapplied overhead	20500
Gross Profit	328500