Question

Marcelino Co.'s March 31 inventory of raw materials is $84,000. Raw materials purchases in April are $580,000, and factory payroll cost in April is $379,000. Overhead costs incurred in April are: indirect materials, $54,000; indirect labor, $25,000; factory rent, $32,000; factory utilities, $21,000; and factory equipment depreciation, $52,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $675,000 cash in April. Costs of the three jobs worked on in April follow.

	Job 306				Job 307				Job 308
Balances on March 31
Direct materials		$	32,000			$	37,000
Direct labor			24,000				15,000
Applied overhead			12,000				7,500
Costs during April
Direct materials			133,000				205,000			$	110,000
Direct labor			102,000				151,000				101,000
Applied overhead			?				?				?
Status on April 30	Finished (sold)				Finished (unsold)					In process

1. Materials purchases (on credit).
2. Direct materials used in production.
3. Direct labor paid and assigned to Work in Process Inventory.
4. Indirect labor paid and assigned to Factory Overhead.
5. Overhead costs applied to Work in Process Inventory.
6. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
7. Transfer of Jobs 306 and 307 to Finished Goods Inventory.
8. Cost of goods sold for Job 306.
9. Revenue from the sale of Job 306.
10. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

No	Transaction	General Journal	Debit	Credit
1	a.	Raw materials inventory	580,000
		Accounts payable		580,000
2	b.	Work in process inventory	448,000
		Raw materials inventory		448,000
3	c.	Factory overhead	379,000
		Cash		379,000
4	d.	Factory overhead	25,000
		Factory overhead		25,000
5	e.	Work in process inventory	177,000
		Factory overhead		177,000
6	f(1).	Factory overhead	54,000
		Raw materials inventory		54,000
7	f(2).	Factory overhead	32,000
		Cash		32,000
8	f(3).	Factory overhead	21,000
		Accumulated depreciation-factory equipment		21,000
9	f(4).	Factory overhead	52,000
		Accumulated depreciation-factory equipment		52,000
10	g.	Finished goods inventory
		Work in process inventory
11	h.	Cost of goods sold
		Finished goods inventory
12	i.	Accounts payable	675,000
		Sales		675,000
13	j.	Cost of goods sold
		Factory overhead

	MARCELINO COMPANY Schedule of Cost of Goods Manufactured For Month Ended April 30 Direct materials used Direct labor used 354,000 Factory overhead applied Total manufacturing costs 354,000 Add: Work in process April 30 Total cost of work in process 354,000 Less: Underapplied overhead Cost of goods manufactured $354,000

Compute gross profit for April.

	Gross profit

Show how to present the inventories on the April 30 balance sheet.

	Inventories Raw materials Work in process Finished goods Total inventories $0

Answer 1

	Job 306	Job 307	Job 308
Direct material	$32,000	$37,000
Direct labor	24,000	15,000
Applied overhead	12,000	7,500
Total	68,000	59,500
Cost during April
Direct materials	133,000	205,000	110,000
Direct labor	102,000	151,000	101,000
Applied overhead@50%	51,000	75,500	50,500
Total	354,000	491,000	261,500
Status on April 30	Finished (sold)	Finished (unsold)	In process

Indirect materials	$54,000
Indirect labor	25,000
Factory rent	32,000
Factory utilities	21,000
Factory equipment depreciation	52,000
Actual overhead	184,000
Applied overhead ($51,000+75,500+50,500)	177,000
Underapplied overhead	$7,000

g	Finished goods inventory ($354,000+491,000)	$845,000
	Work in process inventory		$845,000
h	Cost of goods sold	$354,000
	Finished goods inventory		$354,000
j	Cost of goods sold	$7,000
	Factory overhead		$7,000

MARCELINO COMPANY Schedule of Cost of Goods Manufactured For Month Ended April 30
Direct material used ($133,000+205,000+110,000)	$448,000
Direct labor	354,000
Factory overhead applied	177,000
Total manufacturing cost	979,000
Add: Work in process April 1 (68,000+59,500)	127,500
Less: Work in process April 30	(261,500)
Less: Underapplied overhead	(7,000)
Cost of goods manufactured	$838,000

Gross profit = Sales - Adjusted cost of goods sold

Gross profit = $675,000 - 361,000 (354,000+7,000) = $314,000

Inventories
Raw materials ($84,000+580,000-448,000)	$216,000
Work in process	261,500
Finished goods	491,000
Total inventories	$968,500