Exercise 1: What is the Direct Materials Used in Production (dollars)? See circle on the printed exercise.

Exercise 1: Is the amount of overhead Under or Over Applied? UNDER or OVER? See circle on the printed exercise.

Exercise 1: What is the Cost of Goods Manufactured (dollars)? See circle on the printed exercise.

Exercise 1: What is the ending balance in Work in Process Inventory? See circle on printed exercise.

EXERCISE 1: Be sure to carefully review the text and other materials before attempting this exercise Peyton Inc. provided the following information for the most recent fiscal year. Raw Materials Purchased Direct Labor Incurred and Paid $84,000 80,000 Cash Raw Materials Inventory Work in Process (WIP) Inventory Finished Goods Inventory January 1 $275,000 48,000 56,000 72,000 December 31 $51,500 34,000 46,500 74,500 Use the T-accounts on the last page to record the following entries. The January 1st balances have already been inserted in the T-accounts. a) Record the Raw Materials Purchased for the year based on the above schedule. Assume all purchases were made using cash. 1 Page b) Record the Materials used in production. Assume these were the Direct Materials added to Work in Process (WIP). Use the following schedule to calculate the number you will need for the entry: Raw Materials Inventory - (Calculate Direct Materials Used) Beginning Raw Materials Inventory - Jan 1st $ ADD: Raw Materials Purchased Subtotal: Raw Materials Available for Use ( ) LESS: Ending Raw Materials Inventory - Dec 31st Direct Materials used in Production $ c) Record the Direct Labor paid (using cash) to production workers for the year. d) On January 1st, Peyton's cost accountant estimated production for the year to be 10,400 units resulting in $64,480 of indirect overhead costs (MOH). Calculate the Predetermined Overhead Rate assuming estimated units of production as the allocation base. Estimated MOH 1 Estimated Allocation Base = Rate $ units $ per unit The actual units placed into production for the year equaled 10,000 units. Calculate and record the overhead allocation to production: Units into Production X Predetermined OH Rate = MOH Allocated X $ per unit = $ e) Peyton Inc, paid 59,500 for Manufacturing Overhead costs (i.e utilities, rent etc) for the year. Record in the T-accounts. Then, determine whether the Manufacturing Overhead account is over or under applied for the year and by how much. Under or Over Applied? How Much? $ 2 Page f) Peyton Inc. completed 8,400 units and transferred $249,500 of cost from the Work in Process inventory to the Finished Goods inventory. g) Peyton sold 7,900 units on account. The sales price was $342,000. The cost of these goods was $247,000. h) Close the under or over applied MOH to Cost of Goods Sold. Now, complete a Schedule Cost of Goods Manufactured for the year. Hint: Focus on the activity in the WIP account for the year, but note that actual MOH amounts (not the allocated) are used in this schedule. Work in Process Inventory - (Calculate Cost of Goods Manufactured) Beginning Work in Process - Jan 1st $ ADD: Direct Materials Used Direct Labor Actual Manufacturing Overhead (use the debit in this acct) Total Manufacturing Costs to Acct For LESS: Ending Work in Process - Dec 31 $ ( Cost of Goods Manufactured $ Use the above information to complete a schedule of Cost of Goods Sold for the year. Finished Goods Inventory - (Calculate Cost of Goods Sold) Beginning Finished Goods - Jan 1st $ ADD: Cost of Goods Manufactured (from above) Cost of Goods Available for Sale LESS: Ending Finished Goods - Dec 31st ( ) Cost of Goods Sold $ Raw Materials Inventory 48,000 Work in Process Inventory 56,000 Finished Goods Inventory 72,000 Manufacturing Overhead COGS Cash 275,000 TFT Sales Accounts Receivable