Exercise 1-12 Product and Period Cost Flows [LO1-3] The Devon Motor Company prod
ID: 2328302 • Letter: E
Question
Exercise 1-12 Product and Period Cost Flows [LO1-3]
The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 7,170 batteries at a cost of $135 per battery. It withdrew 6,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company’s traveling sales staff. The remaining 6,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90 percent were completed and transferred from work in process to finished goods. Of the cars completed during the month, 30 percent were unsold at April 30th.
Required:
1. Determine the cost of batteries that would appear in each of the following accounts on April 30th.
a. raw material
b.work in progress
c.finished goods
Explanation / Answer
calculation of raw material cost of batteries Particulars Amount beginning raw material inventory 0 Add: battery purchases 7170 Battery available 7170 less: batteries withdraw 6600 inventory of raw material at the ending (1) 570 cost per battery (2) 135 Raw material on april 30 (1)x(2) 76950 calculation of work in progress cost of batteries beginning work in progress inventory - batteries withdraw for production 6500 batteries available 6500 less: batteries tranfrred to fininshed goods (90% *6500) 5850 work in progress inventory at the end (1) 650 cost per battery (2) 135 work in progress on 30 april (1)*(2) 87750 calculation of Finished goods cost of batteries beginning finished goods inventory - Add : battries tranfered from WIP (in part 2) 5850 battries available 5850 less: battries transfred for cost of goods sold (5850*70%) 4095 finished goods at the end (1) 1755 cost per battery (2) 135 finished goods on 30 april (1)*(2) 236925 here 70% because there is unsold 30% i.e. (100%-30%)
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