[Solution] he following information is available for Lock-Tite Company, which produces special-order security…..

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 $ 42,000 $ 38,000
     Work in process 9,800 18,200
     Finished goods 63,000 33,000
  Activities and information for May
     Raw materials purchases (paid with cash) 194,000
     Factory payroll (paid with cash) 330,000
     Factory overhead
        Indirect materials 13,000
        Indirect labor 65,000
        Other overhead costs 111,000
     Sales (received in cash) 1,200,000
     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 Materials (RM) Work in Process (WIP)
0 0
Factory Payroll Finished Goods (FG)
0 0
Factory Overhead
Income statement (partial)
$0

Expert Answer

 

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T-Accounts :

RAW MATERIAL A/C :
DEBIT AMOUNT $ CREDIT AMOUNT $
OB 42000 F overhead 13000
RM purchased 194000 DM used 185000
CB 38000
Total 236000 Total 236000
WIP ACCOUNT :
OB 9800 COGM 587350
DM COST (balance of Mat A/c) 185000 CB 18200
DL COST (balance of Fac. Payroll) 265000
Overhead allocated (55% of DL cost) 145750
Total 605550 Total 605550
FACTORY PAYROLL ACCOUNT :
Labor cost paid 330000 Indirect labor 65000
DL used 265000
Total 330000 Total 330000
FINISHED GOODS ACCOUNT :
OB 63000 COGS 617350
COGM 587350 CB 33000
Total 650350 Total 650350
FACTORY OVERHEAD ACCOUNT :
Indirect Material 13000 WIP (overhead applied) (55% of DL cost) 145750
indirect Labor 65000 Under-applied overhead 43250
other costs 111000
Total 189000 189000

Calculation of the figure :

1. Cost of direct materials used= $185000 (as per Raw Material account)
2. Cost of direct labor used = $265000 (as per Factory payroll account)
3. Cost of goods manufactured = $587350 (as per WIP account)
4. Cost of goods sold = $617350 (as per Finished Goods account)
5. Gross profit = Sales – COGS = $1200000 – $617350 = $582650
6. Overapplied or underapplied overhead = Under applied overhead $43250 (as per Factory Overhead a/c)

 

 

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