Chapter 19, Problem 1GLP

To determine

Product Cost:

The cost incurred on the production of a particular job or product is called product cost. The cost in production of a product usually involves raw material used, direct labor used and manufacturing overhead applied. It is recorded by debiting the work in process account for all the cost and crediting the raw material inventory account, wages payable account and manufacturing overhead.

To determine:

Prepare journal entries to record the cost of jobs and their flow through manufacturing environment.

Preparation of schedule of cost of goods manufactured and partial income statement

Answer to Problem 1GLP

Solution:

1.

Accounts name	Debit	Credit
Raw Materials Inventory	$500,000
Accounts Payable		$500,000
Work in Process Inventory	$455,000
Raw Material Inventory		$455,000
Work in Process Inventory	$340,000
Cash		$340,000
Work in Process Inventory	$170,000
Manufacturing Overhead		$170,000
Manufacturing Overhead	$50,000
Raw Materials Inventory		$50,000
Manufacturing Overhead	$23,000
Cash		$23,000
Manufacturing Overhead	$32,000
Cash		$32,000
Manufacturing Overhead	$19,000
Cash		$19,000
Manufacturing Overhead	$51,000
Accumulated Depreciation – Factory Equipment		$51,000
Finished Goods Inventory	$828,500
Work in Process Inventory		$828,500
Cost of Goods Sold	$321,500
Finished Goods Inventory		$321,500
Cash	$635,000
Sales		$635,000
Cost of Goods Sold	$5,000
Manufacturing Overhead		$5,000

2.

MARCELINO COMPANY Schedule of Cost of Goods Manufactured For Month Ended April 30
Direct Materials used	$455,000
Direct Labor used	$340,000
Manufacturing Overhead Applied	$170,000
Total Manufacturing costs	$965,000
Add: Beginning balance of Work in Process on March 31	$121,000
Total cost of Work in Process	$1,086,000
Less : Ending balance of Work in Process on April 30	$257,500
Cost of Goods Manufactured	$828,500

3.

MARCELINO COMPANY Partial Income Statement For Month Ended April 30
Sales	$635,000
Less: Cost of Goods Sold ($321,500 + $5,000)	$326,500
Gross Profit	$308,500

Explanation of Solution

Explanation:

Computation of Production of Cost

	Job 306	Job 307	Job 308	Total
March 31
Direct Materials	$29,000	$35,000		$64,000
Direct Labor	$20,000	$18,000		$38,000
Overhead Applied	$10,000	$9,000		$19,000
Beginning goods in process	$59,000	$62,000	0	$121,000
During April
Direct Materials	$135,000	$220,000	$100,000	$455,000
Direct Labor	$85,000	$150,000	$105,000	$340,000
Overhead Applied	$42,500	75,000	$52,500	$170,000
	$262,500	$445,000	$257,400	$965,000
Total Cost (April 30)	$321,500	$507,000	$257,500	$1,086,000
	Finished (sold )	Finished (Unsold)	In Process

$\begin{array}{l}ComputationofOverheadApplied\hfill \\ \hfill \\ AppliedOverheadJob\left(306\right)=50\%ofDirectlaborcost\hfill \\ =0.50X\$85,000\hfill \\ =\$42,500\hfill \\ \hfill \\ AppliedOverheadJob\left(307\right)=50\%ofDirectlaborcost\hfill \\ =0.50X\$150,000\hfill \\ =\$75,000\hfill \\ \hfill \\ AppliedOverheadJob\left(308\right)=50\%ofDirectlaborcost\hfill \\ =0.50X\$105,000\hfill \\ =\$52,500\hfill \\ \hfill \\ TotalAppliedOverheadCost=\$42,500+\$75,000+\$52,500\hfill \\ =\$170,000\hfill \end{array}$

$\begin{array}{l}ActualOverheadCostincurred=\$50,000+\$23,000+\$32,000+\$19,000+\$51,000\hfill \\ =\$175,000\hfill \\ \hfill \\ UnderappliedOverheadCost=ActualOverheadCost–AppliedOverheadCost\hfill \\ =\$175,000-\$170,000\hfill \\ =\$5,000\hfill \end{array}$

$\begin{array}{l}CostofGoodsSold=ProductionCost\left(Job306\right)+UnderappliedOverheadCost\hfill \\ =\$321,500+\$5,000\hfill \\ =\$326,500\hfill \end{array}$

Conclusion

Conclusion:

Hence it is concluded that the Marcelino Co. has completed jobs worth $828,500 (306 & 307) and transfer to finished goods inventory. Job 306 with cost of goods sold of $326,500 was sold on cash for $635,000 and earned gross profit of $308,500.