Chapter 20, Problem 1APSA

(1) Computation of (a) Production Costs transferred from Cutting to Stitching, (b)Production Costs Transferred from Stitching to Finished Goods and (c) Cost of goods Sold

To determine

Concept Introduction:

Production Cost Flow:

In a production unit, finished goods need to pass through a number of departments until they are ready, thus the costs incurred in each department help to understand the total cost incurred to produced the goods.

Requirement 1

To Determine:

1. Production Cost Transferred from Cutting to Stitching
2. Production Cost Transferred from Stitching to Finished Goods
3. Cost of Goods Sold

Answer to Problem 1APSA

1. Production Cost transferred from Cutting to Stitching=$61975
2. Production Cost Transferred from Stitching to Finished Goods=$202055
3. Cost of Goods Sold=$213905

Explanation of Solution

Explanation:

Work In Process Inventory-Cutting
Particulars	Amount	Particulars	Amount
Beginning Balance	43500	Production Cost Transferred to Stitching Department	61975
Direct Materials Used-Cutting	21750
Direct Labour-Cutting	15600
Factory Overhads(Budgeted)	32625	Ending Balance	51500
(150% of Direct Materials)
	113475		113475

$\text{Prod}\text{. Cost Trf}\text{. to Blending Department=Beg}\text{. Inv}\text{.+Direct Materials+Direct Labour+Factory Overheads-Ending Inventory}$

$\text{Cost of Goods Sold=\$213905}$

$\text{Prod}\text{. Cost Trf}\text{. to Stitching Department=43500+21750+15600+32625-51500}$

$\text{Prod}\text{. Cost Trf}\text{. to Stitching Department=\$61975}$

Work in process Inventory-Stitching
Particulars	Amount	Particulars	Amount
Beginning Balance	63300	Production Cost Transferred to Finished Goods	202055
Production Cost from Cutting Department	61975
Direct Materials Used-Stitching	0
Direct Labour-Stitching	62400
Factory Overhads(Budgeted)	74880	Ending Balance	60500
(120% of Direct Labour)
	262555		262555

$\text{Prod}\text{. Cost Trf}\text{. to FG=Beg}\text{. Inv}\text{.+Prod}\text{. Cost From Mixing+Direct Materials+Direct Labour+Factory Overheads-Ending Inv}\text{.}$

$\text{Prod}\text{. Cost Trf}\text{. to FG=63300+61975+62400+74880-60500}$

$\text{Prod}\text{. Cost Trf}\text{. to FG=\$202055}$

Particulars	Amount	Particulars	Amount
Beginning Balance	20100	Cost of Goods Sold	213905
Production Cost from Stitching Department	202055
		Ending Balance	8250
	222155		222155

$\text{Cost of Goods Sold=Beg}\text{. Inv}\text{.+Prod}\text{. Cost From Blending-Ending Inv}\text{.}$

$\text{Cost of Goods Sold=20100+202055-8250}$

$\text{Cost of Goods Sold=\$213905}$

1. Journal Entries to record the flow of cost

To determine

Concept Introduction:

Production Cost Flow:

In a production unit, finished goods need to pass through a number of departments until they are ready, thus the costs incurred in each department help to understand the total cost incurred to produced the goods.

Requirement 2

To Determine:

Journal Entries for flow of cost.

Answer to Problem 1APSA

Date	Particulars	Debit	Credit
31-Mar	Raw Material Inventory	25000
	To Accounts Payable		25000
	(Being Raw Materials Purchased)
31-Mar	Work in Process Inventory-Cutting	21750
	Work in Process Inventory-Stitching	15600
	To Raw Materials Inventory		37350
	(Being Raw Materials Consumed)
31-Mar	Factory Overheads	6000
	To Raw Materials Inventory		6000
	(Being Indirect Materials Consumed)
31-Mar	Direct Labour-Cutting	0
	Direct Labour-Stitching	62400
	To Salaries And Wages		62400
	(Being Wages Charged to Cutting and Stitching)
31-Mar	Factory Overheads	55000
	To Salaries and Wages		55000
	(Being Indirect Labour Charged to Factory Overheads)
31-Mar	Salaries and Wages	133000
	To Cash		133000
	(Being Salaries and Wages Paid)
31-Mar	Factory Overheads	47000
	To Accounts Payable		47000
	(Being Factory Overheads Paid)
31-Mar	Work in Process Inventory-Cutting	32625
	Work in Process Inventory-Stitching	74880
	To Factory Overheads		107505
	(Being Factory Overheads Applied)
31-Mar	Work in Process Inventory-Stitching	61975
	To Work in process Inventory-Cutting		61975
	(Being Production cost of cutting transferred to Stitching Dept)
31-Mar	Work in Process Inventory-Cutting	202055
	To Finished Goods Inventory		202055
	(Being Production cost of Stitching transferred to Finished Goods Inventory)
31-Mar	Finished Goods Inventory	213905
	To Cost of Sales		213905
	(Being Cost of Goods Sold)
31-Mar	Accounts Receivables	256000
	To Sales		256000
	(Being Sales Made)

Explanation of Solution

The above entries have been passed for respective transactions as per questions.