Alden company recorded the following transactions for the just completed month.
ID: 2422085 • Letter: A
Question
Alden company recorded the following transactions for the just completed month. The company had no beginning inventories.
(a) $72,000 in raw materials were purchased for cash.
(b) $67,000 in raw materials were requisitioned for use in production. Of this amount, $56,000 was for direct materials and the remainder was for indirect materials.
(c) Total labor wages of $112,000 were incurred and paid in cash. Of this amount, $94,000 was for direct labor and $18,000 was for indirect labor.
(d) Additional manufacturing overhead costs of $108,000 were incurred and paid in cash.
(e) Manufacturing overhead costs of $130,000 were applied to jobs using the company's predetermined overhead rate.
(f) All of the jobs worked on during the month were completed and shipped to customers.
(g) The underapplied or overapplied overhead for the month was closed out to Cost of Goods Sold.
Required:
a. Post the above transactions to T-accounts
b. Determine the cost of gooods manufactured.
c. Determine the cost of goods sold (after closing Manufacturing Overhead).
Explanation / Answer
ANSWER 1 : Posting transactions to T-accounts
a)debit raw material for $ 72000 and credit cash for the same.
b) debit W-I-P$ 56000 & debit manufacturing overhead $11000 & credit raw materials for $ 67000
c) debit W-I-P $ 94000 and debit manufacturing overhead $ 18000 and credit cash $112000
d) debit manufacturing overhead and credit cash by $ 108000
e) debit W-I-P and credit manufactuing overhead by $130000
ANSWER 2
Cost of goods manufactured = direct materials+direct labour +manufacturing overhead assigned
Cost of goods manufactured = 56000+94000+130000 = $ 280000
ANSWER 3
Total W-I-P tansferred to Finished Goods ( since All of the jobs worked on during the month were completed and shipped to customers) = 56000+94000+130000 = $ 280000
Balance of manufacturing overhead(The underapplied or overapplied overhead for the month was closed out to Cost of Goods Sold) = 11000+18000+108000-130000 = $ 7000
Cost of Goods Sold = 280000+7000 = $ 287000
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