6-29

a. Compute cost of goods sold for March.

Details
Material
Labor
Manufacturing Overhead
Total Cost

Amount
$188,000
$48,400
$98,000
$334,400

Details
Beginning inventory
Started in March
Total
Ending work in process inventory (80%
completed)
Transferred out

Gallons
450,000
450,000
50,000
400,000

Cost per gallon = $334,400 / 410,000 = $0.82 per gallon

Cost of goods sold = Cost per gallon x Number of gallons transferred
Cost of goods sold = $0.82 x 400,000 = $328,000

b. What is the value of work-in-process inventory on March 31?

Work in process inventory = Cost per gallon x Number of gallons in work in process
Work in process inventory = $0.82 x (50,000 x 0.20) = $8,200

6-31
The production supervisor estimates that the ending work in process is 80 percent complete.
Compute the cost of paint transferred to finished goods and the amount in work-in-process
ending inventory as of January 31.

300,000 240,000 = 60,000 gallons

60,000 x 80% = 48,000 gallons

240,000 + 48,000 = 288,000 gallons completed
$411,000 + $525,000 = $936,000 Total Cost
$936,000 / 288,000 gallons = $3.25

The cost of paint transferred to finished goods is

$3.25 x 240,000 gallons = $780,000

7-22
a. What was the cost of direct materials purchased in June?
$447,000
b. What was the over- or underapplied manufacturing overhead for June?
$10,000
c.

What was the manufacturing overhead application rate in June?

$350,000 / $35 per hour = 10,000 hours

$250,000 / 10,000 hours = $25 per hour
d. What was the cost of products completed during June?
$822,000
e. What was the balance of the Work-in-Process Inventory account at the beginning of June?
BB = EB + TO TI
BB = $400,000 + $822,000 ($402,000 + $350,000 + $250,000)
BB = $400,000 + $822,000 - $1,002,000
BB = $220,000
f.

What was the operating profit for June? Any over- or underapplied overhead is written off
to Cost of Goods Sold.

$1,020,000 ($222,000 + $819,000 - $10,000) = $1,020,000 - $1,031,000 = -$11,000

Operating loss of $11,000

7-28
Refer to the information in Exercise 7-27. Prepare an entry to allocate over= or underapplied
overhead to:

Predetermined overhead rate = Estimated manufacturing overhead / Estimated Direct Labor Cost
Predetermined overhead rate = $625,000 / $500,000 = $1.25

Job
Job 21
Job 22
Job 23
Total

Manufacturing Overhead Applied to Each Job

Direct Labor
Predetermined
Applied
Cost
Rate
Overhead
$195,000

$1.25

$243,750

$325,000

$1.25

$406,250

$130,000

$1.25

$162,500

$650,000

$1.25

$812,500

Total overhead cost assigned to each job = $812,500

Manufacturing overhead - Applied manufacturing overhead = Underapplied overhead
$825,000 $812,500 = $12,500

Underapplied Manufacturing Overhead Applied to Inventory

Accounts
Overhead
Charge
Inventory
Overhead Applied Rate
Applied
d
($162,500/$812,500)x12,50
Work in Process
$162,500
$2,500
0
($406,250/$812,500)x12,50
Finished Goods
$406,250
$6,250
0
Cost of Goods
($243,750/$812,500)x12,50
$243,750
$3,750
Sold
0
$12,50
Total
$812,500
0

Particulars
Applied manufacturing
overhead
Work in process inventory
Finished goods inventory
Cost of goods sold
Manufacturing overhead
control

Amount
$812,50
0
$2,500
$6,250
$3,750

Amount

$825,00
0

a. Work in Process
$2,500
b. Finished Goods
$6,250
c.

Cost of Goods Sold

$3,750

8-44
a. Prepare a production cost report for Elmhurst using the weighted-average method.

units
Beg, inventory

80,000

Units Started

400,000

units to account for

480,000

Units from beg,

inventory

80,000

Started n completed

280,000

Total Transferred out

360,000

Material

Labor

360,000

Overhead

360,000
100
%

48,000

360,000
40
%

End, inventory

120,000

120,000

48,000

units accounted for

480,000

480,000

408,000

408,000

Cost in beg
Current cost

$
1,222,800
$

$
240,000
$

$
546,000
$

$
436,800
$

40
%

Total cost to be
accounted for

5,534,400
$
6,757,200

cost per EU

Cost transferred out

Cost in Ending inventory
Total cost accounted for

$
5,724,000
$
1,033,200
$
6,757,200

1,560,000
$
1,800,000

2,208,000
$
2,754,000

1,766,400
$
2,203,200

$
3.75

$
6.75

$
5.40

$
1,350,000
$
450,000
$
1,800,000

$
2,430,000
$
324,000
$
2,754,000

$
1,944,000
$
259,200
$
2,203,200

b. Show the journal entry required to correct the difference between the unaudited records
and actual ending balances of Work-in-Process Inventory and Finished Goods Inventory.
Debit or credit Cost of Goods Sold for any difference.

Unaudited Costs
Correct
Difference

Work in Process

c.

Work in
Process
$793,152
$1,033,200
($240,048)

Finished
Goods
$337,560
$318,000
$19,560

$240,048

Finished Goods

$19,560

Cost of Goods Sold

$220,488

If the adjustment in requirement (b) is not made, will the companys income and
inventories be overstated or understated?

Income would have been understated. Work in process would have been understated. Finished
goods would have been overstated.
8-45

a. Prepare a production cost report; the company uses FIFO process costing.
Units
Beg, inventory

300

Conversion
Costs

Units Started

2,700

units to account for

3,000

Units from beg, inventory

300

120

Started n completed

2,550

2,550

Total Transferred out

2,850

End, inventory

150

30

units accounted for

3,000

2,700

$
168
$
10,800
$
10,968

$
168
$
10,800
$
10,968

Cost in beg
Current cost
Total cost to be accounted for

Cost to complete beg inv

Cost from units started/completed
Total cost of units TO
Cost in Ending inventory
Total cost accounted for

20%

$
4.00

cost per EU

Cost from beg

40%

$
168
$
480
$
10,200
$
10,848
$
120
$
10,968

$
168
$
480
$
10,200
$
10,848
$
120
$
10,968

b. Show the flow of costs through T-accounts. Assume that current period
conversion costs are credited to various payables.
Work in Process
Beg. Inventory for
$168
Conversion Costs
Period Cost for Conversion
$10,8 $10,8
Costs
00
48
Ending Inventory
$120

To Finished Goods
Inventory

Various Payables
Finished Goods
$10,800
Inventory
$10,848
c. Management is concerned that production costs are rising and would like to
hold them to less than $4.25 per unit. Has the company achieved this target?
Write a short report to management stating your answer.
The companys target has been achieved. Production costs total $4.00 per unit, less
than managements target of $4.25