Exercise 1-12 Product and Period Cost Flows [LO1-3] The Devon Motor Company prod
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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 6,620 batteries at a cost of $110 per battery. It withdrew 6,100 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 The remaining 6,000 batteries withdrawn from the storeroom were placed in cars being produced by the company.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.
raw material?
work in process?
finished goods?
cost of goods sold?
selling expenses?
Explanation / Answer
Total Batteries Purchased
Cost per Battery
Total Amount
6620
110
$ 728,200.00
Number of Batteries still unissued
Cost per Battery
Cost of batteries in Raw material
520
110
$ 57,200.00
Units of batteries Used By sales Staff
Cost per Battery
Cost of batteries in Selling Expense
100
110
$ 11,000.00
Units of batteries in WIP Closing Inventory
Cost per Battery
Cost of batteries in Selling Expense
600
110
$ 66,000.00
Units of batteries in Finished Goods sold
Cost per Battery
Cost of batteries in Selling Expense
3780
110
$ 415,800.00
Units of batteries in Finished Goods Closing inventory
Cost per Battery
Cost of batteries in Selling Expense
1620
110
$ 178,200.00
Calculations of Number of Batteries in each section
Number of Batteries still unissued
(6620-6100)
520
Units of batteries Used By sales Staff
100 already given
100
Units of batteries in WIP Closing Inventory
(Issued Quantity x 10% incomplete cars)
(6000*10%)
600
Units of batteries in Finished Goods sold
(units used in Production of finished goods x sold percentage of Finished goods)
(5400*70%)
3780
Units of batteries in Finished Goods Closing inventory
(units used in Production of finished goods x sold percentage of Finished goods unsold)
(5400*30%)
1620
Final Answer
Cost of batteries that would appear in each of the following accounts on April 30 are
raw material
$ 57,200.00
work in process
$ 66,000.00
finished goods
$ 415,800.00
cost of goods sold
$ 178,200.00
selling expenses
$ 11,000.00
Total
$ 728,200.00
Reconciliation
Units Purchased
6620
Inventory :-
in Raw material
520
issued to sales staff
100
left in WIP
600
used in goods sold
3780
used in Ending finished goods inventory
1620
Total
6620
Total Batteries Purchased
Cost per Battery
Total Amount
6620
110
$ 728,200.00
Number of Batteries still unissued
Cost per Battery
Cost of batteries in Raw material
520
110
$ 57,200.00
Units of batteries Used By sales Staff
Cost per Battery
Cost of batteries in Selling Expense
100
110
$ 11,000.00
Units of batteries in WIP Closing Inventory
Cost per Battery
Cost of batteries in Selling Expense
600
110
$ 66,000.00
Units of batteries in Finished Goods sold
Cost per Battery
Cost of batteries in Selling Expense
3780
110
$ 415,800.00
Units of batteries in Finished Goods Closing inventory
Cost per Battery
Cost of batteries in Selling Expense
1620
110
$ 178,200.00
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