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. Set up the following general ledger accounts and enter the June 30 balances: Raw Materials Inventory, $25,000; Work in Process Inventory, $8,135 ($2,660 of direct materials and $5,475 of conversion); Finished Goods Inventory, $110,000; 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. a. Purchased raw materials for $125,000 cash (the company uses a perpetual inventory system). b. Used raw materials as follows: direct materials, $52,440; and indirect materials, $10,000. c. Recorded factory wages payable costs as follows: direct labor, $202,250; and indirect labor, $25,000. d. Paid factory payroll cost of $227,250 with cash (ignore taxes). e. Incurred additional factory overhead costs of $80,000 paid in cash. f. Applied factory overhead to production at 50% of direct labor costs.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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.
Set up the following general ledger accounts and enter the June 30 balances: Raw Materials
Inventory, $25,000; Work in Process Inventory, $8,135 ($2,660 of direct materials and $5,475 of conversion);
Finished Goods Inventory, $110,000; Sales, $0; Cost of Goods Sold, $0; Factory Wages Payable,
$0; and Factory Overhead, $0.
1. Prepare
a. Purchased raw materials for $125,000 cash (the company uses a perpetual inventory system).
b. Used raw materials as follows: direct materials, $52,440; and indirect materials, $10,000.
c. Recorded factory wages payable costs as follows: direct labor, $202,250; and indirect labor, $25,000.
d. Paid
e. Incurred additional factory overhead costs of $80,000 paid in cash.
f. Applied factory overhead to production at 50% of direct labor costs.
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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
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, $8,135 ($2,660 of direct materials and $5,475 of conversion); Finished Goods Inventory, $110,000; Sales, $0; Cost of Goods Sold, $0; Factory Wages Payable, $0; and Factory Overhead, $0.
2. Information about the July work in process (WIP) inventory follows. Use this information with that from part 1 to prepare a production cost report, assuming the weighted average method is used.
| Units | ||
|---|---|---|
| Beginning WIP inventory | 5,000 | units |
| Started | 14,000 | units |
| Units transferred out | 11,000 | units |
| Ending WIP inventory | 8,000 | units |
| Beginning WIP inventory | |
|---|---|
| Direct materials—Percent complete | 100% |
| Conversion—Percent complete | 75% |
| Ending WIP inventory | |
|---|---|
| Direct materials—Percent complete | 100% |
| Conversion—Percent complete | 40% |
3. Using the results from part 2 and the available information, make computations and prepare
- Total costs transferred to finished goods for July.
- Sale of finished goods costing $265,700 for $625,000 in cash.
4.
5. Compute the amount of gross profit from the sales in July.
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