Chapter 20, Problem 1BPSB

(1) Computation of (a) Production Costs transferred from Mixing to Blending, (b)Production Costs Transferred from Blending 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 Mixing to Blending
2. Production Cost Transferred from Blending to Finished Goods
3. Cost of Goods Sold

Answer to Problem 1BPSB

1. Production Cost transferred from Mixing to Blending=$263000
2. Production Cost Transferred from Blending to Finished Goods=$388488
3. Cost of Goods Sold=$408438

Explanation of Solution

Explanation:

Work In Process Inventory-Mixing
Particulars	Amount	Particulars	Amount
Beginning Balance	156000	Production Cost Transferred to Blending Department	263000
Direct Materials Used-Mixing	174000
Direct Labour-Mixing	52500
Factory Overhads(Budgeted)	130500	Ending Balance	250000
(75% of Direct Materials)
	513000		513000

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

$\text{Prod}\text{. Cost Trf}\text{. to Blending Department=156000+174000+52500+130500-250000}$

$\text{Prod}\text{. Cost Trf}\text{. to Blending Department=\$236000}$

Work in process Inventory-Blending
Particulars	Amount	Particulars	Amount
Beginning Balance	160000	Production Cost Transferred to Finished Goods	388488
Production Cost from Mixing Department	263000
Direct Materials Used-Blending	44000
Direct Labour-Blending	74680
Factory Overhads(Budgeted)	44808	Ending Balance	198000
(60% of Direct Labour)
	586488		586488

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

$\text{Prod}\text{. Cost Trf}\text{. to FG=160000+236000+44000+74680+44808-198000}$

$\text{Prod}\text{. Cost Trf}\text{. to FG=\$388488}$

Finished Goods Invnetory
Particulars	Amount	Particulars	Amount
Beginning Balance	80200	Cost of Goods Sold	408438
Production Cost from Blending Department	388488
		Ending Balance	60250
	468688		468688

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

$\text{Cost of Goods Sold=80200+388488-60250}$

$\begin{array}{l}\text{.}\\ \text{Cost of Goods Sold=\$408438}\end{array}$

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 1BPSB

Date	Particulars	Debit	Credit
31-Mar	Raw Material Inventory	212000
	To Accounts Payable		212000
	(Being Raw Materials Purchased)
31-Mar	Work in Process Inventory-Mixing	174000
	Work in Process Inventory-Blending	44000
	To Raw Materials Inventory		218000
	(Being Raw Materials Consumed)
31-Mar	Factory Overheads	41200
	To Raw Materials Inventory		41200
	(Being Indirect Materials Consumed)
31-Mar	Direct Labour-Mixing	52500
	Direct Labour-Blending	74680
	To Salaries And Wages		127180
	(Being Wages Charged to Mixing and Blending)
31-Mar	Factory Overheads	69500
	To Salaries and Wages		69500
	(Being Indirect Labour Charged to Factory Overheads)
31-Mar	Salaries and Wages	196680
	To Cash		196680
	(Being Salaries and Wages Paid)
31-Mar	Factory Overheads	64660
	To Accounts Payable		64660
	(Being Factory Overheads Paid)
31-Mar	Work in Process Inventory-Mixing	130500
	Work in Process Inventory-Blending	44808
	To Factory Overheads		175308
	(Being Factory Overheads Applied)
31-Mar	Work in Process Inventory-Blending	263000
	To Work in process Inventory-Mixing		263000
	(Being Production cost of mixing transferred to Blending Dept)
31-Mar	Work in Process Inventory-Mixing	388488
	To Finished Goods Inventory		388488
	(Being Production cost of Blending transferred to Finished Goods Inventory)
31-Mar	Finished Goods Inventory	408438
	To Cost of Sales		408438
	(Being Cost of Goods Sold)
31-Mar	Accounts Receivables	490000
	To Sales		490000
	(Being Sales Made)

Explanation of Solution

Explanation:

The entries as have been passed as per transactions specified in the question as on 31 Mar.