In: Accounting
Brown Company makes copper fire pits. Each job is unique in size and design. Brown has provided you with the following January 1, 2011 account balances.
Raw Materials, 1/1/2021 $35,000
Work-in-process 1/1/2021 $80,000
Finished Goods 1/1/2021 $72,000
During 2011, the following transactions occurred:
1. Brown purchased raw materials for $125,000 on account.
2. Brown used $150,000 of raw materials in production. Ninety percent were direct materials and 10 percent were indirect materials.
3. $72,000 of direct labor and $30,000 of indirect labor was incurred and paid.
4. Other manufacturing overhead incurred and paid totaled $55,000.
5. Brown completed production on goods costing $275,000
6. Brown’s sales revenue was $520,000. All goods were sold on account.
7. Brown cost of goods sold was $330,000 before adjusting for over-/under-applied overhead.
8. Brown applies overhead at 150% of direct labor cost.
9. Brown collected $530,000 from customers and paid $140,000 to vendors.
10. Brown closes over-/under-applied overhead to Cost of Goods Sold.
Required:Provide the ending balance in:
1. Materials Inventory
2. Work-in-Process Inventory
3. Finished Goods Inventory
4. COGS prior to the disposition of under or over applied overhead
5. How much overhead was applied?
6. Was it under or over applied?
7. COGS after the disposition of under or over applied overhead.
1. Ending balance in Raw Materials Inventory = $10,000
2. Ending balance in Work-in Process Inventory = $105,000
3. Ending balance in Finished Goods Inventory = $17,000
4. Cost of Goods sold prior to the disposition of over applied or under applied overhead is same as the Cost of goods sold before adjusting over or under applied overhead. That is $330,000.
5. Overhead applied was $108,000
6. Over applied (refer the ledger account of Manufacturing Overheads.)
7. Cost of goods sold after disposition of under or over applied overheads = $322,000
Workings: