Chapter 2, Problem 18E

To determine

(a)

Introduction:

Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

To record:

The transactions in T-shape accounts.

Explanation of Solution

Raw Materials Inventory:

Particulars	$ (Debit)	Particulars	$ (Credit)
(a) Purchases	20,000	(b) Materials issued (job 201)	12,000
		(b) Materials issued (job 201)	21,000
		(b) Indirect materials	3,200

Work in process Inventory

Particulars	$ (Debit)	Particulars	$ (Credit)
(b) Materials issued (job 201)	12,000
(b) Materials issued (job 202)	21,000
(c) Direct labor (job 201)	2,150
(c) Direct labor (job 202)	10,750
(d) Applied overhead (600×$25)	15,000

Finished Goods Inventory:

Particulars	$ (Debit)	Particulars	$ (Credit)
Completed and transferred (job 201)	16,650

Manufacturing Overhead:

Particulars	$ (Debit)	Particulars	$ (Credit)
(b) Indirect materials	3,200	(d) Applied overhead (600×$25)	15,000
(c) Factory supervision	5,000

Sales Revenue:

Particulars	$ (Debit)	Particulars	$ (Credit)
(i) Sales (job 200)	31,000

To determine

(b)

Introduction:

Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

To prepare:

The T-accounts and calculate their ending balances.

Explanation of Solution

Raw Materials Inventory:

Particulars	$ (Debit)	Particulars	$ (Credit)
Opening Balance	32,000	(b) Materials issued (job 201)	12,000
(a) Purchases	20,000	(b) Materials issued (job 202)	21,000
		(b) Indirect materials	3,200
		Closing Balance	15,800
	52,000		52,000
Opening Balance	15,800

Work in process Inventory

Particulars	$ (Debit)	Particulars	$ (Credit)
Opening Balance	15,500	(f) Completed and transferred to finished goods (Job 201)	16,650
(b) Materials issued (job 201)	12,000	Closing Balance	59,750
(b) Materials issued (job 202)	21,000
(c) Direct labor (job 201)	2,150
(c) Direct labor (job 202)	10,750
(d) Applied overhead (100×$25)	2,500
(d) Applied overhead (500×$25)	12,500
	76,400		76,400
Opening Balance	59,750

Finished Goods Inventory:

Particulars	$ (Debit)	Particulars	$ (Credit)
Opening Balance	20,000	Closing Balance	34,150
(f) Completed and transferred (job 201)	14,150
	34,150		34,150
Opening Balance	34,150

Manufacturing Overhead:

Particulars	$ (Debit)	Particulars	$ (Credit)
(b) Indirect materials	3,200	(d) Applied overhead (600×$25)	15,000
(c) Factory supervision	5,000
Closing Balance	6,800
	15,000		15,000
		Over applied	6,800

Cost of Goods Sold:

(As per the question, there are no details available regarding the cost of sale of Job 200. Hence, it has been left unbalanced based on the available information.)

Particulars	$ (Debit)	Particulars	$ (Credit)
		Over applied	6,800

Miscellaneous Accounts:

Particulars	$ (Debit)	Particulars	$ (Credit)
(e) Factory rent	3,100	(e) Factory insurance	1,250
(e) Depreciation expense	2,500	Closing Balance	6,100
(e) Factory utilities	1,750
	7,350		7,350
Opening Balance	6,100

Sales Revenue:

Particulars	$ (Debit)	Particulars	$ (Credit)
Closing Balance	31,000	(g) Sales (job 200)	31,000
	31,000		31,000
		Opening Balance	31,000

To determine

(c)

Introduction:

Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

To calculate:

The cost of goods manufactured.

Explanation of Solution

Cost of Goods Manufactured (For Job 201 and 202)

(As per the question, the ratio of both the jobs isn’t available to segregate the purchases, use of indirect materials and various other factors. Thus, the question has been solved considering all the values equally for each job.)

Particulars	Job 201 ($)	Job 202 ($)
Beginning raw material inventory	32,000	32,000
(+) Raw material purchases	10,000	10,000
(-) Indirect materials	(1,600)	(1,600)
(-) Ending raw material inventory	(28,400)	(19,400)
Direct material used	20,400	21,000
Direct labor	2,150	10,750
Manufacturing overhead applied	2,500	12,500
Total current manufacturing costs	26,650	44,750
(+) Beginning work in process inventory	15,500	15,500
(-) Ending work in process inventory	(16,550)	(44,250)
Cost of goods manufactured.	14,000	16,000

The cost of goods manufactured are shown in the ‘cost of goods sold’ account to calculate the adjusted cost of goods sold and determine the profit, thereof.