Question

Ryde and Rowe Inc. had the following account balances as of January 1.

Direct Materials Inventory		$	8,700
Work in Process Inventory			76,500
Finished Goods Inventory			53,000
Manufacturing Overhead			0

During the month of January, all of the following occurred.

1. Direct labor costs were $42,000 for 1,800 hours worked.

2. Direct materials costing $30,000 and indirect materials costing $4,300 were purchased.

3. Sales commissions of $17,500 were earned by the sales force.

4. $21,000 worth of direct materials were used in production.

5. Advertising costs of $6,300 were incurred.

6. Factory supervisors earned salaries of $12,460.

7. Indirect labor costs for the month were $3,000.

8. Monthly depreciation on factory equipment was $4,500.

9. Utilities expense of $6,980 was incurred in the factory.

10. Equipment with manufacturing costs of $69,000 were transferred to finished goods.

11. Monthly insurance costs for the factory were $4,200.

12. $5,000 in property taxes on the factory were incurred and paid.

13. Equipment with manufacturing costs of $93,580 were sold for $170,146.

Required:  
a. If Ryde and Rowe assigns manufacturing overhead of $34,400, what will be the balances in the Direct Materials, Work in Process, and Finished Goods Inventory accounts at the end of January?

b. As of January 31, what will be the balance in the Manufacturing Overhead account?​

c. What was Ryde and Rowe’s operating income for January?

Answer 1

a.

Direct material inventory as at the beginning	$8,700
Direct material purchased	30,000
Direct material available	38,700
Direct material used in production	-21,000
Direct material inventory as at the end	$17,700
Work in process inventory at the beginning	$76,500
Total manufacturing costs:
Direct material	21,000
Direct labor	42,000
Manufacturing overhead assigned	34,400
Cost of goods manufactured	173,900
Cost of goods transferred to finished goods	-69,000
Work in process inventory at the end	$104,900
Finished goods inventory at the beginning	$53,000
Cost of goods transferred to finished goods	69,000
Cost of goods sold	-93,580
Finished goods inventory at the end	$28,420

b.

Balance in manufacturing overhead = Actual overhead - Applied overhead

Balance in manufacturing overhead = $40,440 - 34,400 = $6,040

Actual overhead :

Indirect material	$4,300
Indirect labor	3,000
Factory supervisors salaries	12,460
Depreciation on factory equipment	4,500
Utilities expense	6,980
Insurance cost on factory	4,200
Property taxes on factory	5,000
Total	$40,440

c.

Sales		$170,146
Cost of goods sold		93,580
Gross profit		76,566
Operating expenses:
Sales commission	$17,500
Advertising cost	6,300	23,800
Operating income		$52,766