Major League Bat Company manufactures baseball bats. In addition to its work in process inventories, the company maintains inventories of raw materials and finished goods. It uses raw materials as direct materials in production and as indirect materials. Its factory payroll costs include direct labor for production and indirect labor. All materials are added at the beginning of the process, and conversion costs are applied uniformly throughout the production process. Required: You are to maintain records and produce measures of inventories to reflect the July events of this company. The June 30 balances: Raw Materials Inventory, $25,000; Work in Process Inventory, $8,135 ($2,660 of direct materials and $5,475 of conversion); Finished Goods Inventory, $110,000; Sales, $0; Cost of Goods Sold, $0; Factory Wages Payable, $0; and Factory Overhead, $0. 1. Prepare journal entries to record the following July transactions and events. a. Purchased raw materials for $125,000 cash. b. Used raw materials as follows: direct materials, $52,440, and indirect materials, $10,000. C. Recorded factory wages payable costs as follows: direct labor, $202,250, and indirect labor, $25,000. d. Incurred other actual factory overhead costs of $66,125 paid in cash. e. Applied factory overhead to production at 50% of direct labor costs. 2. Information about the July work in process (WIP) inventory follows. Use this information with that from part 1 to prepare a production cost report, assuming the weighted average method is used. 5,000 units 14,000 units 11,000 units 8,000 units Units Beginning WIP inventory Started Units transferred out Ending WIP inventory Beginning WIP inventory Direct materials-Percent complete Conversion-Percent complete Ending WIP inventory Direct materials-Percent complete Conversion-Percent complete 100% 75% 100% 40% 3. Using the results from part 2 and the available information, make computations and prepare journal entries to record the following: f. Total costs transferred to finished goods for July g. Sale of finished goods costing $265,700 for $625,000 in cash. 4. Post entries from parts 1 and 3 to the following general ledger accounts. 5. Compute the amount of gross profit from the sales in July. 5,000 14,000 19,000 Unit reconciliation: Units to account for: Beginning work in process Units started this period Total units to account for Units accounted for: Completed and transferred out Ending work in process Total units accounted for Equivalent units of production (EUP)- weighted average method 11,000 8,000 19,000 Direct Materials Conversion Units % Complete EUP % Complete EUP 11,000 100% 100% 100% 11,000 8,000 11,000 3,200 8,000 40% 19,000 19,000 14,200 Completed and transferred out Ending work in process Total units Cost per equivalent unit of production Cost of beginning work in process Costs added this period Direct Materials Conversion $ 2,660 52,440 Total costs Costs $ 55,100 Costs EUP 19,000 EUP 14,200 $ 2.90 $ 0.00 + Equivalent units of production Cost per equivalent unit of production (rounded to 2 decimals) Total costs accounted for: Completed and transferred out EUP Cost per EUP Total cost EUP Total cost Direct materials Conversion Total costs completed and transferred out Ending work in process Direct materials Conversion Total cost of ending work in process Total costs accounted for Cost per EUP $ 0.00 0 $ 0.00 0 Post entries from parts 1 and 3 to the following general ledger accounts. Raw Materials Inventory Work in Process Inventory Date Debit Credit Date Debit Credit Account Number 133 Balance 8,135 Account Number 132 Balance 25,000 150,000 87,560 June 30 (a) (b) June 30 125.000 (C) 62,440 (e) (f) Finished Goods Inventory Factory Wages Payable Account Number 135 Balance Account Number 212 Balance Debit Credit Date Debit Credit Date June 30 110,000 265,700 (155,700) Sales Cost of Goods Sold Account Number 413 Balance Date Debit Credit Date Credit Debit 265,700 Account Number 502 Balance 265,700 Factory Overhead Date Debit Credit Account Number 540 Balance 10,000 35,000 10,000 25,000 101,125 (66,125)
