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, $25,000; Work in Process Inventory, $8,135 ($2,660 of direct materials and $5,475 of conversion); Finished Goods Inventory, $110,000; Sales, $0; Cost of Goods Sold, $0; Factory Payroll Payable, $0; and Factory Overhead, $0.

1. Prepare journal entries to record the following July transactions and events.

Purchased raw materials for $125,000 cash (the company uses a perpetual inventory system).

Used raw materials as follows: direct materials, $52,440; and indirect materials, $10,000.

Recorded factory payroll payable costs as follows: direct labor, $202,250; and indirect labor, $25,000.

Paid factory payroll cost of $227,250 with cash (ignore taxes).

Incurred additional factory overhead costs of $80,000 paid in cash.

Allocated 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

S. NO Particulars Debit Credit

1 Raw Materials Inventory $ 125,000

Cash $ 125,000

Purchased raw materials for $125,000 cash

2 Work In Process – Direct Materials $ 52,440

Work In Process – Indirect Materials $ 10,000

Raw Materials Inventory $ 62,440

Used raw materials as follows: direct materials, $52,440; and indirect materials, $10,000.

3 Work In Process ( Direct Labor) $202250

Factory Overhead (Indirect Labor) $25,000

Payroll Account $227,250

Recorded factory payroll payable costs as follows: direct labor, $202,250; and indirect labor, $25,000.

4 Payroll $227,250

Cash $227,250

Paid factory payroll cost of $227,250 with cash (ignore taxes).

5 Factory Overhead $ 80,000

Cash $ 80,000

Incurred additional factory overhead costs of $80,000 paid in cash

6 Work In Process $101,125

Factory Overhead $101,125

Allocated factory overhead to production at 50% of direct labor costs

Process Cost Summary

Costs Per EUP

Direct Material Conversion Costs

Beginning Inventory $25,000

Work In Process Beg. Inventory 2660 5475

Costs Added During the Period 52,440 317250**

Total Costs Incurred in the Period $80,100 $322707

Conversion Costs ** Direct Labor+ Factory Overhead

CC - $ 202250+ $ 25,000+ $ 10,000+ $ 80,000= $317250