Prepare journal entries to record the following July transactions and events. Purchased raw materials for $165,000 cash. Used raw materials as follows: direct materials, $58,040; and indirect materials, $15,000. Recorded factory wages payable costs as follows: direct labor, $214,750; and indirect labor, $30,000. Incurred other actual factory overhead costs of $62,375 paid in cash. Applied factory overhead to production at 50% of direct labor costs. 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.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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, $29,000; Work in Process Inventory, $7,835 ($3,160 of direct materials and $4,675 of conversion); Finished Goods Inventory, $100,000; Sales, $0; Cost of Goods Sold, $0; Factory Payroll Payable, $0; and Factory
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Prepare
journal entries to record the following July transactions and events.- Purchased raw materials for $165,000 cash.
- Used raw materials as follows: direct materials, $58,040; and indirect materials, $15,000.
- Recorded factory wages payable costs as follows: direct labor, $214,750; and indirect labor, $30,000.
- Incurred other actual factory overhead costs of $62,375 paid in cash.
- Applied factory overhead to production at 50% of direct labor costs.
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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 8,000 units Started 10,000 units Units transferred out 14,000 units Ending WIP inventory 4,000 units Beginning WIP Inventory Direct materials—Percent complete 100% Conversion—Percent complete 70% Ending WIP Inventory Direct materials—Percent complete 100% Conversion—Percent complete 30% -
Using the results from part 2 and the available information, make computations and prepare journal entries to record the following:
- Total costs transferred to finished goods for July.
- Sale of finished goods costing $290,700 for $675,000 in cash.
Post entries from parts 1 and 3 to the following general ledger accounts.- Compute the amount of gross profit from the sales in July.
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