Exercise

Luxguard Home Paint Company produces exterior latex paint, which it sells in one-gallon containers. The company has two processing departmentsBase Fab and Finishing. White paint, which is used as a base for all the company's paints, is mixed from raw ingredients in the Base Fab Department. Pigments are then added to the basic white paint, the pigmented paint is squirted under pressure into one-gallon containers, and the containers are labeled and packed for shipping in the Finishing Department. Information relating to the company's operations for April follows:

A) Issued raw materials for use in production: Base Fab Department, $851,000; and Finishing Department, $629,000.

B) Incurred direct labor costs: Base Fab Department, $330,000; and Finishing Department, $270,000.

C) Applied manufacturing overhead cost: Base Fab Department, $665,000; and Finishing Department, $405,000.

D) Transferred basic white paint from the Base Fab Department to the Finishing Department, $1,850,000. E. Transferred paint that had been prepared for shipping from the Finishing Department to Finished Goods, $3,200,000.

Required:

1) Prepare journal entries to record items (a) through (e) above.

2) Post the journal entries from (1) above to T-accounts. The balance in the Base Fab Department's Work in Process account on April 1 was $150,000; the balance in the Finishing Department's Work in Process account was $70,000. After posting entries to the T-accounts, find the ending balance in each department's Work in Process account.

3) Determine the cost of ending work in process inventories and of units transferred out of the Base Fab Department in April.

4) Prepare cost reconciliation report for April.

The following additional information is available regarding production in the Base Fab Department during April:

Production data:

1)labor ;Units (gallons) in process, April 1: materials 100% complete and overhead 60% complete30,000

2)Units (gallons) started into production during April 420,000

3)Units (gallons) completed and transferred to the Finishing Department 370,000

4)Units (gallons) in process, April 30: materials 50% complete; labor and overhead 25% complete 80,000

Cost data:

Work in process inventory, April 1:

Materials$92,000

Labor$21,000

Overhead$37,000

Total cost of work in process$150,000

Cost added during April:

Materials$851,000

Labor $330,000

Overhead$665,000

Total cost added during April$1,846,000