Question

Major League Bat Company manufactures baseball bats. In addition to its work in process inventories, the company maintains inventories of raw materials and finished goods. It uses raw materials as direct materials in production and as indirect materials. Its factory payroll costs include direct labor for production and indirect labor. All materials are added at the beginning of the process, and conversion costs are applied uniformly throughout the production process. Required: You are to maintain records and produce measures of inventories to reflect the July events of this company. The June 30 balances: Raw Materials Inventory, $26,000; Work in Process Inventory, $10,750 ($3,010 of direct materials and $7,740 of conversion); Finished Goods Inventory, $180,000; Sales, $0; Cost of Goods Sold, $0; Factory Wages Payable, $0; and Factory Overhead, $0. 1. Prepare journal entries to record the following July transactions and events. a. Purchased raw materials for $150,000 cash (the company uses a perpetual inventory system). b. Used raw materials as follows: direct materials, $79,140; and indirect materials, $13,500. c. Recorded factory wages payable costs as follows: direct labor, $211,000; and indirect labor, $28,500. d. Paid factory payroll cost of $239,500 with cash (ignore taxes). e. Incurred additional factory overhead costs of $87,000 paid in cash. f. Applied factory overhead to production at 50% of direct labor costs. 2. Information about the July inventories follows. Use this information with that from part 1 to prepare a process cost summary, assuming the weighted average method is used. (Round "Cost per EUP" to 2 decimal places.)

Answer 1

1.

Transaction	General Journal	Debit	Credit
a.	Raw materials inventory	150000
	Cash		150000
	(To record raw materials purchased for cash)
b.	Work in process inventory	79140
	Factory overhead	13500
	Raw materials inventory		92640
	(To record direct and indirect materials used)
c.	Work in process inventory	211000
	Factory overhead	28500
	Factory wages payable		239500
	(To record factory wages payable)
d.	Factory wages payable	239500
	Cash		239500
	(To record payment of factory payroll cost)
e.	Factory overhead	87000
	Cash		87000
	(To record additional factory overhead costs paid)
f.	Work in process inventory	105500
	Factory overhead (50% x $211000)		105500
	(To record factory overhead allocated to production)

2.

Total costs to account for:
Beginning work in process	10750
Costs incurred during the period	395640
Total costs to account for	406390
Total costs accounted for	406390
	0
Unit reconciliation:
Units to account for:
Beginning goods in process	8500
Started during the period	18000
Total units to account for	26500
Total units accounted for:
Completed and transferred out	14500
Ending goods in process	12000
Total units accounted for	26500

Equivalent units of production (EUP)-weighted average method
	Units	% Materials	EUP-Materials	% Labor	EUP-Conversion
Completed and transferred out	14500	100%	14500	100%	14500
Ending goods in process	12000	100%	12000	40%	4800
Total units			26500		19300
Cost per equivalent unit of production			Materials		Conversion
Cost of beginning goods in process			3010		7740
Costs incurred during the period			79140		316500
Total costs		Costs	82150	Costs	324240
÷ Equivalent units of production		EUP	26500	EUP	19300
Cost per equivalent unit of production (rounded to 2 decimals)			3.10		16.80
Total costs accounted for:
Cost of units transferred out:	EUP	Cost per EUP	Total cost
Direct materials	14500	3.10	44950
Conversion	14500	16.80	243600
Total costs transferred out				288550
Costs of ending goods in process	EUP	Cost per EUP	Total cost
Direct materials	12000	3.10	37200
Conversion	4800	16.8	80640
Total costs of ending goods in process				117840
Total costs accounted for				406390

3.

Transaction	General Journal	Debit	Credit
g.	Finished goods inventory	288550
	Work in process inventory		288550
	(To record costs transferred to finished goods)
h.	Cash	660000
	Sales		660000
	(To record cash sales)
	Cost of goods sold	283200
	Finished goods inventory		283200
	(To record the cost of goods sold)

4.

Raw Materials Inventory					Work in Processs Inventory
Transactions	Debit	Credit	Balance		Transactions	Debit	Credit	Balance
June 30			26000		June 30			10750
a.	150000		176000		b.	79140		89890
b.		79140	96860		c.	211000		300890
b.		13500	83360		f.	105500		406390
					g.		288550	117840
Finished Goods Inventory					Factory Wages Payable
Transactions	Debit	Credit	Balance		Transactions	Debit	Credit	Balance
June 30			180000		June 30			0
g.	288550		468550		c.		211000	211000
h.		283200	185350		c.		28500	239500
					d.	239500		0
Sales					Cost of Goods Sold
Transactions	Debit	Credit	Balance		Transactions	Debit	Credit	Balance
h.		660000	660000		h.	283200		283200
Factory Overhead
Transactions	Debit	Credit	Balance
b.	13500		13500
c.	28500		42000
e.	87000		129000
f.		105500	23500

5.

Sales	660000
Cost of goods sold ($283200 + $23500)	306700
Gross profit $	353300

Underapplied overhead = Overhead incurred - Overhead applied = ($13500 + 28500 + 87000) - $105500 = $129000 - $105500 = $23500