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Exercise 1-12 Product and Period Cost Flows [LO1-3] The Devon Motor Company produces automobiles. On April...

Exercise 1-12 Product and Period Cost Flows [LO1-3]

The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 7,170 batteries at a cost of $135 per battery. It withdrew 6,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company’s traveling sales staff. The remaining 6,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90 percent were completed and transferred from work in process to finished goods. Of the cars completed during the month, 30 percent were unsold at April 30th.

Required:

1. Determine the cost of batteries that would appear in each of the following accounts on April 30th.

a. raw material

b.work in progress

c.finished goods

Solutions

Expert Solution

calculation of raw material cost of batteries
Particulars Amount
beginning raw material inventory 0
Add: battery purchases 7170
Battery available 7170
less: batteries withdraw 6600
inventory of raw material at the ending (1) 570
cost per battery (2) 135
Raw material on april 30 (1)x(2) 76950
calculation of work in progress cost of batteries
beginning work in progress inventory -
batteries withdraw for production 6500
batteries available 6500
less: batteries tranfrred to fininshed goods (90% *6500) 5850
work in progress inventory at the end (1) 650
cost per battery (2) 135
work in progress on 30 april (1)*(2) 87750
calculation of Finished goods cost of batteries
beginning finished goods inventory -
Add : battries tranfered from WIP (in part 2) 5850
battries available 5850
less: battries transfred for cost of goods sold (5850*70%) 4095
finished goods at the end (1) 1755
cost per battery (2) 135
finished goods on 30 april (1)*(2) 236925
here 70% because there is unsold 30% i.e. (100%-30%)

ekkarill92 answered 1 year ago
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