Question

Marcelino Co.'s March 31 inventory of raw materials is $90,000. Raw materials purchases in April are $590,000, and factory payroll cost in April is $384,000. Overhead costs incurred in April are: indirect materials, $53,000; indirect labor, $29,000; factory rent, $38,000; factory utilities, $21,000; and factory equipment depreciation, $61,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $670,000 cash in April. Costs of the three jobs worked on in April follow. Problem 2-1A Part 2 Materials purchases (on credit). Direct materials used in production. Direct labor paid and assigned to Work in Process Inventory. Indirect labor paid and assigned to Factory Overhead. Overhead costs applied to Work in Process Inventory. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.) Transfer of Jobs 306 and 307 to Finished Goods Inventory. Cost of goods sold for Job 306. Revenue from the sale of Job 306. 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. Job 306 Job 307 Job 308 Balances on March 31 Direct materials $ 29,000 $ 37,000 Direct labor 24,000 19,000 Applied overhead 12,000 9,500 Costs during April Direct materials 137,000 205,000 $ 115,000 Direct labor 103,000 152,000 100,000 Applied overhead ? ? ? Status on April 30 Finished (sold) Finished (unsold) In process rev: 03_14_2018_QC_CS-121813 Problem 2-1A 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 2-1A Part 3 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

Solution :

Journal Entries - Marcelino Co
Event	Particulars	Debit	Credit
a	Raw material inventory Dr	$590,000.00
	To Accounts Payable		$590,000.00
	(To record purchase of raw material)
b	Work In Process Dr	$457,000.00
	To Raw material inventory		$457,000.00
	(To record raw material used in production)
c	Work In Process Dr	$355,000.00
	To Cash		$355,000.00
	(To record direct labor payment and assigment to production)
d	Factory overhead Dr	$29,000.00
	To Cash		$29,000.00
	(To record Indirect labor payment and assigment to factory overhead)
e	Work In Process Dr	$177,500.00
	To Factory Overhead		$177,500.00
	(To apply overhead to production)
f	Factory Overhead Dr	$173,000.00
	To Raw material inventory		$53,000.00
	To Accumulated depreciation - Factory Equipment		$61,000.00
	To Cash		$59,000.00
	(To record factory overhead cost incurred)
g	Finished goods inventory Dr	$855,000.00
	To Work In Process		$855,000.00
	(Being completed jobs transferred to finished goods)
h	Cost of goods sold Dr	$356,500.00
	To Finished goods inventory		$356,500.00
	(To record cost of goods sold for Job 306)
i	Cash Dr	$670,000.00
	To Sales Revenue		$670,000.00
	(To record sales of Job 306)
j	Cost of goods sold Dr	$24,500.00
	To Factory Overhead ($202,000 - $177,500)		$24,500.00
	(To close underapplied overhead to COGS)

Computation of production cost incurred in april and total cost assigned to each job
Particulars	Job 306	Job 307	Job 308	Total
From March:
Direct material	$29,000.00	$37,000.00	$0.00	$66,000.00
Direct labor	$24,000.00	$19,000.00	$0.00	$43,000.00
Applied overhead (50% of direct labor)	$12,000.00	$9,500.00	$0.00	$21,500.00
Beginning Goods in Process	$65,000.00	$65,500.00	$0.00	$130,500.00
For April:
Direct material	$137,000.00	$205,000.00	$115,000.00	$457,000.00
Direct labor	$103,000.00	$152,000.00	$100,000.00	$355,000.00
Applied overhead (50% of direct labor)	$51,500.00	$76,000.00	$50,000.00	$177,500.00
Total Cost added in April	$291,500.00	$433,000.00	$265,000.00	$989,500.00
Total Costs (April 30)	$356,500.00	$498,500.00	$265,000.00	$1,120,000.00
Status on April 30	Finished (Sold)	Finished (Unsold)	In Process
April 30 cost included in	Cost of goods sold	Finished goods inventory	Work In Process Inventory

Marcelino company
Schedule of cost of goods manufactured
For the month ended April 30
Particulars	Amount
Direct material	$457,000.00
Direct labor	$355,000.00
Applied overhead (50% of DL Cost)	$177,500.00
Total manufacturing costs	$989,500.00
Add: Beginning WIP	$130,500.00
Total cost of work in process	$1,120,000.00
Less: Ending WIP	$265,000.00
Cost of goods manufactured	$855,000.00

Gross profit for april = Sales - Cost of goods sold = $670,000 - ($356,500 + $24,500) = $289,000

Inventories - April 30
Particulars	Amount
Raw material inventory ($90,000 + $590,000 - $457,000 - $53,000)	$170,000.00
Work In Process Inventory	$265,000.00
Finished goods inventory	$498,500.00
Total	$933,500.00