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, $25,000; Work in Process Inventory, $8,385 ($2,960 of direct materials and $5,425 of conversion); Finished Goods Inventory, $170,000; Sales, $0; Cost of Goods Sold, $0; Factory Wages Payable, $0; and Factory Overhead, $0.

1. Prepare journal entries to record the following July transactions and events.

1. Purchased raw materials for $145,000 cash (the company uses a perpetual inventory system).
2. Used raw materials as follows: direct materials, $72,040; and indirect materials, $13,000.
3. Recorded factory wages payable costs as follows: direct labor, $209,750; and indirect labor, $28,000.
4. Paid factory payroll cost of $237,750 with cash (ignore taxes).
5. Incurred additional factory overhead costs of $86,000 paid in cash.
6. Applied 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	8,000	units
Started	17,000	units
Ending inventory	11,000	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:

7. Total costs transferred to finished goods for July.
8. Sale of finished goods costing $280,700 for $655,000 in cash.

4. Post entries from parts 1 and 3 to the following general ledger accounts.
5. Compute the amount of gross profit from the sales in July. (Hint: Add any underapplied overhead to, or deduct any overapplied overhead from, the cost of goods sold.)

Answer 1

1	Transaction	General Journal					Debit	Credit
	a.	Raw materials inventory					145000
		Cash						145000
		(Materials purchased)
	b.	Work in process inventory					72040
		Factory overhead					13000
		Raw materials inventory						85040
		(Materials used in production)
	c.	Work in process inventory					209750
		Factory overhead					28000
		Factory Wages payable						237750
		(Labor cost assigned to work in process)
	d.	Factory Wages payable					237750
		Cash						237750
		(Factory payroll paid)
	e.	Factory overhead					86000
		Cash						86000
		(Additional overhead cost)
	f.	Work in process inventory			(209750*50%)		104875
		Factory overhead						104875
		(Overhead costs applied)
2		Process cost summary
	Costs charged to production				$	$
	Costs of beginning work in process
	Direct materials				2960
	Conversion				5425	8385
	Costs incurred this period
	Direct materials				72040
	Conversion		(209750+104875)		314625	386665
	Total costs to account for					395050
	Unit information
	Units to account for				Units accounted for
	Beginning work in process			8000	Completed and transferred out			(25000-11000)		14000
	Units started this period			17000	Ending work in process					11000
	Total units to account for			25000	Total units accounted for					25000
	Equivalent units of production						DM	Conversion
	Units completed and transferred out						14000	14000
	Units of ending work in process
	Direct materials				(11000*100%)		11000
	Conversion				(11000*30%)			3300
	Equivalent units of production (EUP)						25000	17300