Analyzing Manufacturing Cost Accounts

Big Wave Company manufactures surf boards in a wide variety of sizes and styles. The following incomplete ledger accounts refer to transactions that are summarized for July:

Materials
July 1	Balance	36,400	July 31	Requisitions	(A)
July 31	Purchases	146,400

Work in Process
July 1	Balance	(B)	July 31	Completed jobs	(F)
July 31	Materials	(C)
July 31	Direct labor	(D)
July 31	Factory overhead applied	(E)

Finished Goods
July 1	Balance	0	July 31	Cost of goods sold	(G)
July 31	Completed jobs	(F)

Wages Payable
			July 31	Wages incurred	116,300

Factory Overhead
July 1	Balance	21,700	July 31	Factory overhead applied	(E)
July 31	Indirect labor	(H)
July 31	Indirect materials	19,500
July 31	Other overhead	58,700

In addition, the following information is available:

Materials and direct labor were applied to six jobs in July:

Job No.		Style	Quantity		Direct Materials				Direct Labor
No. 21		X-10	200			$25,600				$15,000
No. 22		X-20	390			40,620				26,000
No. 23		X-50	170			14,500				7,000
No. 24		T-20	250			39,250				25,000
No. 25		X-40	180			26,380				16,000
No. 26		T-10	130			9,390				4,000
		Total	1,320			$155,740				$93,000

Factory overhead is applied to each job at a rate of 130% of direct labor cost.

The July 1 Work in Process balance consisted of two jobs, as follows:

Job No.	Style	Work in Process, July 1
Job 21	X-10	$5,900
Job 22	X-20	15,800
Total		$21,700

Customer jobs completed and units sold in July were as follows:

Job No.	Style	Completed in July	Units Sold in July
No. 21	X-10	X	160
No. 22	X-20	X	312
No. 23	X-50		0
No. 24	T-20	X	210
No. 25	X-40	X	149
No. 26	T-10		0

1. Determine the missing amounts associated with each letter and complete the following table. If required, round amounts to the nearest dollar. If an answer is zero, enter in "0". Enter all amounts as positive numbers.

Job No.	Quantity	July 1 Work in Process		Direct Materials		Direct Labor		Factory Overhead		Total Cost		Unit Cost		Units Sold	Cost of Goods Sold
No. 21		$ 5,900		$ 25,600		$ 15,000		$		$		$				$
No. 22		15,800		40,620		26,000
No. 23				14,500		7,000
No. 24				39,250		25,000
No. 25				26,380		16,000
No. 26				9,390		4,000
Total		$21,700		155,740		93,000		$		$						$

a. Materials Requisitions $

b. Work in Process Beginning Balance $

c. Direct Materials $

d. Direct Labor $

e. Factory overhead applied $

f. Completed jobs $

g. Cost of goods sold $

h. Indirect labor $

2. Determine the July 31 balances for each of the inventory accounts and factory overhead. Use the minus sign to indicate any credit balances.

Materials:	$
Work in Process:	$
Finished Goods:	$
Factory Overhead:	$

Feedback

1 a & c. Direct and Indirect materials are requisitioned. Direct materials are recorded in Work in Process and Indirect materials are recorded in Factory overhead.

b. The beginning work in process information is given.

d, e & h. Direct labor cost information is given. Overhead is applied based on direct labor cost.

f & g. Beginning Work in Process balances plus all current period manufacturing costs are included in the cost of completed jobs and jobs sold.

2. Insert your amounts calculated in (1) into the T accounts. Then determine the ending balances.

Learning Objective 2.