THE FOLLOWING DATA APPLY TO ITEMS 2732 Welton Manufacturing

THE FOLLOWING DATA APPLY TO ITEMS 27-32: Welton Manufacturing Company prepares its montly income statements on the basis of ACTUAL costs for the period. The company\'s accounting records show the following operating results for the month ending May 31, 2xXx: Sales . $500,000 95,000 180,000 Direct manufacturing labor Indirect manufacturing labor.. Factory supplies. Factory heat, light and power. 15,000 2,000 6,000 Depreciation - plant building10,000 40,000 Miscellaneous factory overhead...1,000 100,000 Depreciation - plant equipment.. Marketing and administrative costs. May31 $13,000 9,000 10,000 Inventory data May 1 Direct Work-in-process 7,000 Finished goods...8,000 The company uses a pre-determined overhead rate to apply overhead cost to jobs. The rate for the year was $10 per machine hours; a total of 7,500 machine hours was recorded during the month. 27. The amount of direct materials used during the month is $90,000 B. $95,000 C. $100,000 D. $105,000 28. Total actual indirect manufacturing (factory overhead) costs incurredduring the month is A. $52,000 B. $13,500 C. $63,000 D. $74,000 The cost of goods manufactured during the monthare A. $362,000 B. $343,000 C. $180,000 D. $350,000 29.

Solution

27) Direct Material Used :-

= Raw Materials Purchase + Beginning Direct Materials Inventory - Ending Direct Materials Inventory

= $95000 + $8000 - $13000

= $90000

28) Total Actual Indirect Manufacturing costs :-

= indirect Manufacturing Labor + Factory Supplies + Factory Heat, Light and Power + Dep. - Plant Building

+ Dep. Equipment + Miscellaneous Factory Overhead

= $15000 + $2000 + $6000 + $10000 + $40000 + $1000

= $74000

29) Cost of Goods Manufactured :-

= Direct Materials Used + Direct Manufacturing Labor + Manufacturing Overhead + Beginning Work in Process

+ Beginning Fixed Goods - Ending Work in Process - Ending Fixed Goods

= $90000 + $180000 + $74000 + $7000 + $18000 - $9000 - $10000

= $350000

30) Factory Overhead Cost :-

= Overhead Incurred - Overhead Applied

= $74000 - (7500*$10)

= $74000 - $75000

= - $1000 (Over applied)

Over Applied By $1000.

31). Cost of Goods Sold after Adjusting for Over applied overhead :-

= Cost of Goods Manufactured - over applied overhead

= $350000 - $1000

= $349000

32) Operating Income :-

= Sales - Cost of Goods Manufactured After Adjusting - Marketing and Administrative Cost

= $500000 - $349000 - $100000

= $51000