Question

Sierra Company manufactures woven blankets and accounts for product costs using process costing. The company uses a single processing department. The following Information is available regarding its May Inventories 

Raw materials inventory Work in process inventory Finished goods inventory Beginning Ending Inventory Inventory $ 55,000 $ 68,500 439,000 613,000 605,000 564,000 

The following additional Information describes the company's production activities for May. 

$ 280,000 1,582,000 5,000 $ Raw materials purchases (on credit) Factory wages cost (paid in cash) Other overhead cost (Other Accounts credited) Materials used Direct Indirect Labor used Direct Indirect Overhead rate as a percent of direct labor Sales (on credit) 194,500 72,000 $ 790,000 792,000 110% $4,500,000 

The predetermined overhead rate was computed at the beginning of the year as 110% of direct labor cost.

 Required: 

1. Compute the cost of products transferred from production to finished goods and cost of goods sold. 

Answer 1

Raw materials (RM)					Work in process (WIP)
					Beg bal	439,000	Trsfd	1,679,500
Beg bal	55,000	Direct M	194,500		DM used	194,500
purchases	280,000	indirect mat	72,000		DL used	790,000
					OH applied	869000
ending bal	68,500
					end bal	613,000
Factory wages payable					finished goods (FG)
cash	1,582,000	dL used	790,000		beg bal	605,000	COGS	1,720,500
		indirect la	792,000		Tsfd	1,679,500
end bal	0				end bal	564,000
Factory overhead					income statement (partial)
other	5,000	oh applied	869,000		Sales			4,500,000
indirct mat	72,000				cost of goods sold			1,720,500
indirect la	792,000				Gross margin			2,779,500
end bal	0	0
					Cost of goods transferred			1,679,500
					Cost of goods sold			1,720,500