Problem 161A Production cost flow and measurement journal en

Problem 16-1A Production cost flow and measurement; journal entries LO P1, P2, P3, P4 The following information applies to the questions displayed below] Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information is available regarding its May inventories BeginningEnding Raw materials inventory Work in process inventory Finished goods inventory Inventory nventory 65,00035,500 599,000 598,001 423,500 613,000 The following additional information describes the company\'s production activities for May Raw materials purchases (on credit) Factory payroll cost (pald in cash) Other overhead cost (Other Accounts credited) Materials used $ 250,000 1,569,000 3,000 Direct Indirect $213,500 66,000 Labor used Direct Indirect $ 780,000 789000 110% Overhead rate as a percent of direct labor Sales (on credit) $4,500,000 The predetermined overhead rate was computed at the beginning of the year as 110% of direct labor cost.

Solution

Part 1 Cost of products transferred and cost of goods sold Beginning work in process inventory $    423,500 Direct materials used in production        213,500 Direct labor used in production        780,000 Overhead applied (110% of direct labor cost)        858,000 Total production costs     2,275,000 Less ending work in process inventory       (599,000) Transferred to finished goods inventory (a) $ 1,676,000 Beginning finished goods inventory   $    613,000 Plus goods transferred from production       1,676,000 Goods available for sale       2,289,000 Less ending finished goods inventory       (598,001) Cost of goods sold (b)   $ 1,690,999 Part 2 a. May 31 Raw Materials Inventory   250,000       Accounts Payable   250,000    Purchased raw materials. b. May 31 Work in Process Inventory 213,500       Raw Materials Inventory 213,500    Used direct materials. c. May 31 Factory Overhead   66,000       Raw Materials Inventory   66,000    Used indirect materials. d. May 31 Work in Process Inventory 780,000       Factory Payroll   780,000    Used direct labor. e. May 31 Factory Overhead   789,000       Factory Payroll   789,000    Used indirect labor. f. May 31 Factory Payroll   1,569,000       Cash   1,569,000    Incurred payroll cost. g. May 31 Factory Overhead   3,000       Other Accounts   3,000    Incurred other overhead costs. h. May 31 Work in Process Inventory 858,000       Factory Overhead 858,000    Applied overhead at 110% of direct labor cost. i. May 31 Finished Goods Inventory 1,676,000 Work in Process Inventory 1,676,000    Transferred completed products from   production to finished goods inventory. j. May 31 Accounts Receivable   4,500,000       Sales   4,500,000    Sold finished goods. May 31 Cost of Goods Sold   1,690,999       Finished Goods Inventory   1,690,999    To record cost of goods sold for May.