Required information Use the following information to answer questions [The foll

Question

Required information Use the following information to answer questions [The following information applies to the questions displayed below.] The following information is available for Lock-Tite Company, which produces special-order security product job order costing system. Inv ies Raw materials Work in process Finished goods $28,000 10,090 66,000 46,800 18,100 34,700 Activities and information for May Raw materials purchases (paid with cash) Factory payroll (paid with cash) Factory overhead 197,000 258,000 Indirect materials Indirect labor Other overhead costs 7,000 57,500 100,000 Sales (received in cash) Predetermined overhead rate based on direct labor cost 55% xercise 15-7 Cost flows in a job order costing system LO P1, P2, P3, P4 ompute the following amounts for the month of Mav using T-accounts

Explanation / Answer

Ans:-

Ledger Account Name:- Raw Materials Account (RM)

Raw Materials (RM) Account

Ledger Account Name - Work in Process (WIP)

Work-in-process Account

Ledger Account Name - Factory Payroll Account

Factory Payroll Account

Ledger Account Name :- Finished Goods Account

Finished Goods Account (FG)

Ledger Account Name :- Factory Overhead Account

Factory Overhead Account

Income Statement (Partial)

Working Notes:-

Note 1: Cost of direct materials used:-

Beginning Raw materials inventory $ 28,000

Plus: Purchases $197,000

Raw materials available $225,000

Less: Ending Raw Materials ($46,000)

Total raw materials used $179,000

Less:- indirect Material used ($ 7,000)

Cost of direct materials used $172,000

Note 2. Cost of direct labour used:-

Total factory payroll - $250,000

Less:- Indirect labour - ($ 57,500)

Cost of direct labour used - $192,500

Note 3. Costs of goods manufactured:-

Beginning work-in-process inventory - $ 10,000

Plus:- Direct Material $172,000

Plus:- Direct Labour $192,500

Plus:- Overheads Applied $105,875

(55% × $192,500) = $105,875

Total Costs of WIP $480,375

Less:- Ending WIP Inventory ($18,100)

Costs of goods manufactured $462,275

Note 4:- Costs of goods sold:-

Beginning finished goods inventory - $ 66,000

Add:- Costs of goods manufactured $462,275

Less:- Ending Finished goods Inventory ($ 34700)

Costs of goods sold $493,575

Note 5. Calculation of Gross profit:-

Sales - $1,600,000

Less:- Costs Of goods Sold ($ 493,575)

Gross profit $1,106,425

Note 6:- Calculation of over applied overhead

Indirect Materials $ 7000

Plus:- Indirect Labour $57,500

Plus:- Other Overhead costs $100,000

Total actual overhead costs $164,500

Less:- overhead applied ($105,875)

Over applied overhead $58,625

Raw Materials - April 30 $28,000 Raw Materials - Purchases $197,000 $7,000 Indirect Materials $172,000 Direct Materials used (Refer Workings Note 1) Raw Materials - May 31 $46,000

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