Question
Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information
Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information is available regarding its May inventories
Beginning Inventory | Ending Inventory | |||||
Raw materials inventory | $ | 59,000 | $ | 129,000 | ||
Work in process inventory | 433,500 | 553,000 | ||||
Finished goods inventory | 628,000 | 553,000 | ||||
The following additional information describes the company's production activities for May.
Raw materials purchases (on credit) | $ | 300,000 | |
Factory wages cost (paid in cash) | 1,534,000 | ||
Other overhead cost (Other Accounts credited) | 77,000 | ||
Materials used | |||
Direct | $ | 164,000 | |
Indirect | 66,000 | ||
Labor used | |||
Direct | $ | 780,000 | |
Indirect | 754,000 | ||
Overhead rate as a percent of direct labor | 115 | % | |
Sales (on credit) | $ | 2,500,000 | |
The predetermined overhead rate was computed at the beginning of the year as 115% of direct labor cost.
1. Compute the cost of products transferred from production to finished goods and cost of goods sold.
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2. Prepare summary journal entries dated May 31 to record the following production activities during May: (a) raw materials purchases, (b) direct materials usage, (c) indirect materials usage, (d) direct labor costs incurred, (e) indirect labor costs incurred, (f) payment of factory payroll, (g) other overhead costs, (h) overhead applied, (i) goods transferred from production to finished goods, and (j) sale of finished goods.
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