Question

Major League Bat Company manufactures baseball bats. In addition to its goods 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 direct labor and factory overhead 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 are as follows: Raw Materials Inventory, $25,000; Goods in Process Inventory, $10,520 ($2,800 of direct materials, $3,800 of direct labor, and $3,920 of overhead); Finished Goods Inventory, $116,000; Sales, $0; Cost of Goods Sold, $0; Factory Payroll, $0; and Factory Overhead, $0.1. Prepare journal entries to record the following July transactions and events.a. Purchased raw materials for $132,000 cash (the company uses a perpetual inventory system).b. Used raw materials as follows: direct materials, $49,900; and indirect materials, $15,000.c. Incurred factory payroll cost of $173,650 paid in cash (ignore taxes).d. Assigned factory payroll costs as follows: direct labor, $142,650; and indirect labor, $31,000.e. Incurred additional factory overhead costs of $42,795 paid in cash.f. 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.)3. Using the results from part 2 and the available information, make computations and prepare journal entries to record the following:g. Total costs transferred to finished goods for July.h. Sale of finished goods costing $132,010 for $650,000 in cash.4. Post entries from parts 1 and 3 to the following general ledger accounts5. Compute the amount of gross profit from the sales in July. (Add any underapplied overhead too, or deduct any overapplied overhead from, the cost of goods sold.)

Answer 1

Question Completion:

Information about the July inventories follows:

Beginning inventory 8,000 units

Started 17,000 units

Ending inventory 11,000 units

Beginning inventory

Materials—Percent complete 100%

Conversion—Percent complete 80%

Ending inventory

Materials—Percent complete 100%

Conversion—Percent complete 30%

Answer:

Major League Bat Company

1. Journal Entries:

a. Debit Raw Materials Inventory $132,000

Credit Cash Account $132,000

To record the purchase of raw materials.

b. Debit Work in Process $49,900

Debit Manufacturing Overhead $15,000

Credit Raw Materials $64,900

To record materials used.

c. Debit Factory Wages $173,650

Credit Cash Account $173,650

To record factory payroll incurred.

d. Debit Work in Process $142,650

Debit Manufacturing Overhead $31,000

Credit Factory Wages $173,650

To assign factory payroll costs.

e. Debit Manufacturing Overhead $42,795

Credit Cash Account $42,795

To record additional factory overhead costs.

f. Debit Work In Process $71,325

Credit Manufacturing Overhead $71,325

To allocate factory overhead to production at 50% of direct labor costs.

2. Computation of Equivalent Units of Production:

Materials Conversion Total

Beginning inventory 8,000 units 8,000 6,400

Started 17,000 units 17,000 17,000

Ending inventory 11,000 units 11,000 3,300

Total equivalent unit 28,000 20,300

3. Costs of Production:

Beginning Inventory $2,800 $7,720

Raw materials 49,900 213,975

Total costs $52,700 $221,695

Total equivalent unit 28,000 20,300

Cost per equivalent unit $1.88 $10.92

Total costs:

Started 17,000 $31,960 17,000 $185,640 $217,600

Ending inventory 11,000 20,680 3,300 36,036 $56,716

4. Journal Entries:

Debit Finished Goods Inventory $217,600

Credit Work In Process $217,600

To record the transfer of goods.

Debit Cost of Goods Sold $132,010

Credit Finished Goods Inventory $132,010

To record the cost of goods sold.

Debit Cash Account $650,000

Credit Sales Revenue $650,000

To record the sale of goods for cash.

5. Ledger accounts:

Raw Materials Inventory

Accounts Titles Debit Credit

Balance $25,000

Cash Account 132,000

Work in Process $49,900

Manufacturing Overhead 15,000

Work In Process

Accounts Titles Debit Credit

Balance $10,250

Raw materials 49,900

Factory Wages 142,650

Manufacturing

Overhead 71,325

Finished Goods Inventory $217,600

Balance 56,716

Manufacturing Overhead

Accounts Titles Debit Credit

Raw materials $15,000

Factory wages 31,000

Other overheads 42,795

Work in Process applied $71,325

Underapplied overhead 17,470

6. Income Statement:

For July

Sales Revenue $650,000

Cost of goods sold 132,010

Underapplied overhead 17,470 $149,480

Gross profit $500,520

Step-by-step explanation:

a) Data and Calculations:

June 30 Balances:

Raw Materials Inventory, $25,000;

Goods in Process Inventory, $10,520 ($2,800 of direct materials, $3,800 of direct labor, and $3,920 of overhead);

Finished Goods Inventory, $116,000;

Sales, $0;

Cost of Goods Sold, $0;

Factory Payroll, $0; and

Factory Overhead, $0.1.