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selected t-accounts of moore company are given below for the just compl…

Question

selected t-accounts of moore company are given below for the just completed year:

raw materials
debit | credit
balance 1/1: 25,000 | credits: ?
debits: 140,000 |
balance 12/31: 35,000 |

manufacturing overhead
debit | credit
debits: 203,200 | credits: ?

work in process
debit | credit
balance 1/1: 30,000 | credits: 500,000
direct materials: 100,000 |
direct labor: 100,000 |
overhead: 223,200 |
balance 12/31: ? |

factory wages payable
debit | credit
debits: 205,000 | balance 1/1: 14,000
| credits: 200,000
| balance 12/31: 9,000

finished goods
debit | credit
balance 1/1: 50,000 | credits: ?
debits: ? |
balance 12/31: 75,000 |

cost of goods sold
debit | credit
debits: ? |

required:

  1. what was the cost of raw materials used in production?
  2. how much of the materials in (1) above consisted of indirect materials?
  3. how much of the factory labor cost is indirect labor?
  4. what was the cost of goods manufactured?
  5. what was the unadjusted cost of goods sold? do not include any underapplied or overapplied overhead in your answer.
  6. if overhead is applied to production using direct labor cost, what was the predetermined overhead rate?
  7. was manufacturing overhead underapplied or overapplied? by how much?
  8. compute the ending balance in work in process. assume this balance consists entirely of goods started during the year. if $10,500 of this balance is direct labor cost, how much is direct materials cost? applied overhead cost?

Explanation:

Calculate raw materials used in production

Using the Work in Process T-Account and Indirect Materials Calculation knowledge points:
First, determine the total raw materials put into production from the Raw Materials T-account:

$$ \text{Beginning Balance (1/1)} + \text{Debits (Purchases)} - \text{Ending Balance (12/31)} = \text{Total Raw Materials Used} $$
$$ 25,000 + 140,000 - 35,000 = 130,000 $$

Determine indirect materials used

Using the Indirect Materials Calculation knowledge point:
The Work in Process T-account shows that direct materials charged to production equal \(100,000\).
The remaining portion of the raw materials used represents indirect materials:

$$ \text{Indirect Materials} = \text{Total Raw Materials Used} - \text{Direct Materials} $$
$$ \text{Indirect Materials} = 130,000 - 100,000 = 30,000 $$

Determine indirect labor cost

Using the Indirect Labor Calculation knowledge point:
First, find the total factory wages incurred from the Factory Wages Payable T-account:

$$ \text{Credits (Wages Incurred)} = 200,000 $$

The Work in Process T-account shows direct labor charged to production is \(100,000\).
The remaining portion of the factory labor cost represents indirect labor:

$$ \text{Indirect Labor} = \text{Total Factory Labor Cost} - \text{Direct Labor} $$
$$ \text{Indirect Labor} = 200,000 - 100,000 = 100,000 $$

Calculate cost of goods manufactured and unadjusted COGS

Using the Cost of Goods Manufactured and Schedule of Cost of Goods Sold knowledge points:
The credit side of the Work in Process T-account shows the cost of goods completed and transferred to Finished Goods:

$$ \text{Cost of Goods Manufactured} = 500,000 $$

For the unadjusted cost of goods sold, we analyze the Finished Goods T-account:

$$ \text{Beginning Balance (1/1)} + \text{Debits (COGM)} - \text{Ending Balance (12/31)} = \text{Unadjusted Cost of Goods Sold} $$
$$ 50,000 + 500,000 - 75,000 = 475,000 $$

Calculate overhead rate, under/overapplied overhead, and ending WIP details

Using the Predetermined Overhead Rate and Manufacturing Overhead T-Account knowledge points:
The predetermined overhead rate is based on direct labor cost:

$$ \text{Predetermined Overhead Rate} = \frac{\text{Applied Overhead}}{\text{Direct Labor Cost}} = \frac{223,200}{100,000} = 2.232 \text{ or } 223.2\% $$

To find underapplied or overapplied overhead:

$$ \text{Actual Overhead (Debits)} = 203,200 $$
$$ \text{Applied Overhead (Credits)} = 223,200 $$
$$ \text{Overapplied Overhead} = 223,200 - 203,200 = 20,000 \text{ (Overapplied)} $$

For the ending balance in Work in Process:

$$ \text{Ending WIP Balance} = 30,000 \text{ (Beg)} + 100,000 \text{ (DM)} + 100,000 \text{ (DL)} + 223,200 \text{ (OH)} - 500,000 \text{ (COGM)} = 53,200 $$

If the ending WIP balance consists of \…

Answer:

Question 1

The cost of raw materials used in production is \$130,000.

Question 2

The amount of indirect materials included in the raw materials used is \$30,000.

Question 3

The amount of factory labor cost that is indirect labor is \$100,000.

Question 4

The cost of goods manufactured is \$500,000.

Question 5

The unadjusted cost of goods sold is \$475,000.

Question 6

The predetermined overhead rate is 223.2% of direct labor cost (or \$2.232 per \$1.00 of direct labor cost).

Question 7

Manufacturing overhead was overapplied by \$20,000.

Question 8

  • The ending balance in Work in Process is \$53,200.
  • The direct materials cost in this balance is \$19,264.
  • The applied overhead cost in this balance is \$23,436.