P8.2 (LO 1, 2, 3) AN The following T-accounts provide selected data about Locktin's financial resultsfor the year. Sadly, several key components went missing after a thief broke into the Locktin accountingoffice:WIP InventoryRM Inventory22,500 ?75,000 ?Beg. bal.Beg. bal.52,500DM72,000 282,000End. bal.18,000DL90,000Applied MOH 112,500End. balFG InventoryMOH ControlBeg. bal.(Total debits 111,000 ?90,000during theEnd. bal.72,000year)Requireda. What is the amount of indirect material cost incurred this period?b. Specify whether MOH for the period was under- or over applied, and by how much.c. Determine the COGS amount for this period (before any MOH difference would have been closed out).d. Prepare the journal entry to close out the MOH difference, given that the company wants to prorateit to the appropriate accounts based on their ending balances (before proration) (round proportionsto four decimal places, if necessary).e. Did the proration of the MOH difference in part (d) have a significant effect on COGS this period?Explain how you could evaluate significance here. Specify the new adjusted COGS.f. If Locktin reported sales of $475,000 this year, what gross margin percentage did it earn? If thecompany goal was to generate at least a 35% gross margin, did it meet its goal? What does this tell usabout Locktin's control of product costs this period?

Raw material means the material purchased and still not enter in to the production lines. Work in progress means the material enter in to production lines but still not complete as finished goods. Finished goods means the goods which are completed and ready to sale. Due to our policy , we can answer only first three sub parts. For rest answer , please post the question again with specific direction to solve the specific question.

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a. What is the amount of indirect material cost incurred this period? b. Specify whether MOH for the period was under- or over applied, and by how much. c. Determine the COGS amount for this period (before any MOH difference would have been closed out).

a. What is the amount of indirect material cost incurred this period? b. Specify whether MOH for the period was under- or over applied, and by how much. c. Determine the COGS amount for this period (before any MOH difference would have been closed out).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

P8.2 (LO 1, 2, 3) AN The following T-accounts provide selected data about Locktin's financial results
for the year. Sadly, several key components went missing after a thief broke into the Locktin accounting
office:
WIP Inventory
RM Inventory
22,500 ?
75,000 ?
Beg. bal.
Beg. bal.
52,500
DM
72,000 282,000
End. bal.
18,000
DL
90,000
Applied MOH 112,500
End. bal
FG Inventory
MOH Control
Beg. bal.
(Total debits 111,000 ?
90,000
during the
End. bal.
72,000
year)
Required
a. What is the amount of indirect material cost incurred this period?
b. Specify whether MOH for the period was under- or over applied, and by how much.
c. Determine the COGS amount for this period (before any MOH difference would have been closed out).
d. Prepare the journal entry to close out the MOH difference, given that the company wants to prorate
it to the appropriate accounts based on their ending balances (before proration) (round proportions
to four decimal places, if necessary).
e. Did the proration of the MOH difference in part (d) have a significant effect on COGS this period?
Explain how you could evaluate significance here. Specify the new adjusted COGS.
f. If Locktin reported sales of $475,000 this year, what gross margin percentage did it earn? If the
company goal was to generate at least a 35% gross margin, did it meet its goal? What does this tell us
about Locktin's control of product costs this period?

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