Designer Rags makes evening dresses. The following information was gathered from
ID: 2387415 • Letter: D
Question
Designer Rags makes evening dresses. The following information was gathered from the company records for 2010, the first year of company operations. Work in Process Inventory at the end of 2010 was $31,500.The company's gross profit rate for the year was 35 percent.
a. Compute the cost of goods sold for 2010.
$
b. What was the total cost of goods manufactured for 2010?
$
c. What is Finished Goods Inventory at December 31, 2010?
$
d. If net income was $250,000, what were total selling and administrative expenses for the year?
$
e. Prepare journal entries to record the flow of costs for the year, assuming the company uses a perpetual inventory system and a single Manufacturing Overhead Control account and that actual overhead is included in WIP Inventory.
How do i go about solving this?
Explanation / Answer
Amount in $ Amount in $ Computation of Prime Cost Direct materials issued to production 894,000.00 Direct labor 645,000.00 Prime Cost 1,539,000.00 Manufacturing overhead: Indirect labor 186,000.00 Insurance cost 6,000.00 Utilities 42,900.00 Depreciation 65,100.00 Rent 252,000.00 552,000.00 Cost of goods manufactured 2,091,000.00 Less: WIP at the end 31,500.00 Cost of goods sold 2,059,500.00 Sales 2,862,000.00 Less: net profit 250,000.00 Less: cost of goods sold 2,059,500.00 Selling and administrative expense 552,500.00 1 Materials A/c…………Debit 1,110,000 To Cash A/c 1,110,000 2 WIP A/c……..Dr 894,000 To Materials A/c 894,000 3 WIP A/c………Debit 645,000 To direct labor A/c 645,000 4 WIP A/c………Debit 552,000 To Manufacturing overhead A/c 552,000 5 Finished goods A/c……….Dr 2,059,500 To WIP A/c 2,059,500
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