Bowen Company manufactures one product, it does not maintain any beginning or en

Question

Bowen Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. Its predetermined overhead rate includes $1,000,000 of fixed overhead in the numerator and 50,000 direct labor-hours in the denominator. The company purchased (with cash) and used 47,000 yards of raw materials at a cost of $11.30 per yard. Its direct laborers worked 20,750 hours and were paid a total of $291,500. The company started and completed 9,600 units of finished goods during the period. Bowen's standard cost card for its only product is as follows Standard Quantity or Standard Price or Rate Standard Cost Inputs Direct materials Direct labor Fixed manufacturing overhead Total standard cost per unit Hours 4.5 yards 17.50 per yard 3.9 hours 78.75 54.60 78.00 $14.00 per hour 9 hours $20.00 per hour7800 $211.35 Requirec 1. When recording the raw material purchases a. The Raw Materials inventory will increase (decrease) by how much? b. The Cash will increase (decrease) by how much? 2. When recording the raw materials used in production a. The Raw Materials inventory will increase (decrease) by how much? b. The Work in Process inventory will increase (decrease) by how much? 3. When recording the direct labor costs added to production a. The Work in Process inventory will increase (decrease) by how much? b. The Cash will increase (decrease) by how much? 4. When applying fixed manufacturing overhead to production, the Work in Process inventory will increase (decrease) by how much? 5. When transferring manufacturing costs from Work in Process to Finished Goods, the Finished Goods inventory will increase (decrease) by how much?

Explanation / Answer

1. When recording the raw material purchases

The Raw Materials inventory will increase (decrease) by how much

47000*17.50=$822500 increase

The Cash will increase (decrease) by how much?

47000*11.30=$531100 decrease

2. When recording the raw materials used in production

a. The Raw Materials inventory will increase (decrease) by how much?

=9600*78.75=$756000 decrease

b. The Work in Process inventory will increase (decrease) by how much?

=9600*78.75=$756000 Increase

3

3. When recording the direct labor costs added to production:

a. The Work in Process inventory will increase (decrease) by how much?

9600*54.60=$524160 increase

b. The Cash will increase (decrease) by how much?

=291500 decrease

4. When applying fixed manufacturing overhead to production,

the Work in Process inventory will increase (decrease) by how much?

9600*78=748800 increase

When transferring manufacturing costs from Work in Process to Finished Goods, the Finished Goods inventory will increase (decrease) by how much?

9600*211.35=$2028960 increase

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