Comfy Feet manufactures slippers. In 2011, the company hired a new bookkeeper who did not have appropriate training. The bookkeeper charged to “production expense” all of the following costs for manufacturing 70,000 pairs of slippers:
Raw materials…………………………………………$ 30,000
Factory labour…………………………………………100,000
Variable tnanuf. overhead……………………………….8,000
Fixed manufacturing overhead…………………………12,000
Factory depreciation……………………………………25,000
Finished goods storage………………………………….4,000
Interest for carrying finished goods…………………….3,000
Total………………………………………………..$ 182.000
The company had zero work-in-process at the end of both 2010 and 2011. Finished goods amounted to 5,000 pairs at $2.40/pair at the end of 2010. There were 6,000 pairs in finished goods inventor)' at the end of 2011.
Required:
a. Provide the adjusting journal entry or entries to correct the bookkeeper’s errors and properly record the above expenditures recorded in the “production expense” account.
b. Assume the company uses a periodic inventory system and the FIFO cost flow assumption for finished goods. Compute the cost of goods sold and the ending value of finished goods inventory for the year 2011.
c. Now assume the company uses the weighted-average cost flow assumption. Compute the cost of goods sold and the ending value of finished goods.