The following events took place for Fed Inc. during October 2012, the first mont

ID: 2377146 • Letter: T

Question

The following events took place for Fed Inc. during October 2012, the first month of operations as a producer of road bikes:

Purchased $427,000 of materials.

Used $367,500 of direct materials in production.

Incurred $315,000 of direct labor wages.

Applied factory overhead at a rate of 80% of direct labor cost.

Transferred $892,500 of work in process to finished goods.

Sold goods with cost of $848,750.

Sold goods for $1,500,000.

Incurred $367,500 of selling expenses.

Incurred $131,950 of administrative expenses.

b. Determine the inventory balances at the end of the first month of operations.

Purchased $427,000 of materials

Used $367,500 of direct materials in production.

Inventory of Raw Material = 427000 - 367500 = $59500

Incurred $315,000 of direct labor wages.

Applied factory overhead at a rate of 80% of direct labor cost.= 80%*315000 = 252000

Transferred $892,500 of work in process to finished goods.

Inventory of work in process = 934500-89250 = 42000

Total cost of good produced = $892500

Sold goods with cost of $848,750.

Inventory of Finished Goods = 892500 - 848750 = $43750

Sold goods for $1,500,000.

Incurred $367,500 of selling expenses.

Incurred $131,950 of administrative expenses.

Profit = 1500000-848750-367500-131950 = $151800

b. Determine the inventory balances at the end of the first month of operations.

Invenory Balance = Inventory of Raw Material+Inventory of work in process + Inventory of Finished Goods = 59500 +42000 + 43750 = $145250

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