The following information is available for Lock-Tite Company, which produces spe

Question

The following information is available for Lock-Tite Company, which produces special-order security products and usesa job order costing system April 30 May 31 Inventories Raw materials Work in process Finished goods $43,000 9,700 53,000 42,000 18,700 33,800 Activities and information for May Raw materials purchases (paid with cash) Factory payrol1 (paid with cash) Factory overhead 189,000 250,000 Indirect materials Indirect labor Other overhead costs 10,000 57,500 110,500 1,600,000 Sales (received in cash) Predetermined overhead rate based on direct labor cost 55% Compute the following amounts for the month of May using T-accounts 1. Cost of direct materials used 2. Cost of direct labor used 3. Cost of goods manufactured 4. Cost of goods sold. 5. Gross profit. 6. Overapplied or underapplied overhead

Explanation / Answer

RAW MATERIAL INVENTORY Balance 43,000 Work in Process 180,000 (cost of Direct material used) Cash 189,000 Manufacturing OH 10,000 balance 42,000 MANUFACTURING OVERHEADS Raw material Inventory 10,000 Work in process Inventory 105,875 Factory Wages 57,500 (192500*55%) Accounts payable 110,500 balance 72,125 WORK IN PROCESS INVENTORY Balance 9,700 Finished Goods Inventory 479,075 Raw material Inv. 180,000 Factory Wages 192,500 Manufacturing Overheads 105,875 Balance 18,700 FINISHED GOODS INVENTORY Balance 53,000 Cost of Goods sold 498,275 work in Process 479,075 Balance 33,800 Income statement Sales revenue 1,600,000 Less: Adjusted Cost of Goods sold 570400 (498275+72125) Gross margin 1,029,600 Req 1. Cost of direct material cost: 180,000 Req 2: Cost of direct labour 192500 Req 3: Cost of Goods manufactured 479075 Req 4: Cost of Goods sold: 498275 Req 5: Gross profit: 1029600 Req 6: Under-applied OH 72125

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