Sierra Company manufactures woven blankets and accounts for product costs using

Question

Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information is available regarding its May inventories

The following additional information describes the company's production activities for May.

The predetermined overhead rate was computed at the beginning of the year as 115% of direct labor cost.

1. Compute the cost of products transferred from production to finished goods and cost of goods sold.

2. Prepare summary journal entries dated May 31 to record the following production activities during May: (a) raw materials purchases, (b) direct materials usage, (c) indirect materials usage, (d) direct labor costs incurred, (e) indirect labor costs incurred, (f) payment of factory payroll, (g) other overhead costs, (h) overhead applied, (i) goods transferred from production to finished goods, and (j) sale of finished goods.

Beginning
Inventory Ending
Inventory Raw materials inventory $ 59,000 $ 129,000 Work in process inventory 433,500 553,000 Finished goods inventory 628,000 553,000

Explanation / Answer

Solution 1:

Therefore:

Cost of goods transferred = $1,721,500

Cost of goods sold = $1,796,500

Solution 2:

Sierra Company Schedule of direct material used in production For the month ended May 31 Particulars Amount Beginning raw material inventory $59,000.00 Add: raw material purchases $300,000.00 Raw materials available $359,000.00 Less: Ending raw material inventory $129,000.00 Total raw material used $230,000.00 Less: Indirect material used $64,000.00 Direct material used $166,000.00

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