Question

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The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.

	April 30				May 31
Inventories
Raw materials	$	43,000			$	52,000
Work in process		9,300				18,800
Finished goods		50,000				34,200
Activities and information for May
Raw materials purchases (paid with cash)						178,000
Factory payroll (paid with cash)						100,000
Factory overhead
Indirect materials						13,000
Indirect labor						23,000
Other overhead costs						94,000
Sales (received in cash)						1,100,000
Predetermined overhead rate based on direct labor cost						55	%

Compute the following amounts for the month of May using T-accounts.

1. Cost of direct materials used.
2. Cost of direct labor used.
3. Cost of goods manufactured.
4. Cost of goods sold.*
5. Gross profit.
6. Overapplied or underapplied overhead.

  
*Do not consider any underapplied or overapplied overhead.

Raw Matierals (RM)
	0

Work in Process (WIP)
	0

Finished Goods (FG) Inventory
	0

Factory Overhead
	0

Income Statement (partial)
	0

Answer 1

Raw Materials (RM)
RM April 30	43000
RM Purchases	178000
		13000	Indirect materials
		156000	DM used
RM May 31	52000

Factory Payroll
Factory Payroll	100000
		23000	Indirect Labor
		77000	DL used
	0

Work in Process (WIP)
WIP – April 30	9300
DM used	156000
DL used	77000	265850	Cost of goods manufactured
Overhead applied (77000*55%)	42350
WIP – May 31	18800

Finished Goods (FG) Inventory
FG April 30	50000
Cost of goods Manufactured	265850
		281650	Cost of goods sold
FG – May 31	34200

Factory Overhead
Indirect Material	13000	42350	Overhead applied
Indirect Labor	23000
Other overhead costs	94000
Under applied OH	87650

Income Statement (partial)
Sales	1100000
Cost of goods sold	281650
Gross profit	$818350

Beginning raw materials inventory	43000
Plus purchases	178000
Raw materials available	221000
Less ending raw materials inventory	(52000)
Total raw materials used	169000
Less indirect materials used	(13000)
Cost of direct materials used	$156000

Cost of direct labor used
Total factory payroll	100000
Less indirect labor	(23000)
Cost of direct labor used	$77000

Cost of goods manufactured
Beginning work in process inventory	9300
Plus direct materials	156000
Plus direct labor	77000
Plus overhead applied   (55% of direct labor cost)	42350
Total cost of work in process	284650
Less ending work in process inventory	(18800)
Cost of goods manufactured	265850

Cost of goods sold
Beginning finished goods inventory	50000
Plus cost of goods manufactured	265850
Less ending finished goods inventory	(34200)
Cost of goods sold	281650

Actual overhead incurred
Indirect materials	13000
Indirect labor	23000
Other overhead costs	94000
Total actual overhead incurred	130000
Overhead applied	42350
Underapplied overhead	87650