The Bags and Luggage Company had the following account balances as of January 1:
ID: 2356395 • Letter: T
Question
The Bags and Luggage Company had the following account balances as of January 1: Direct Materials Inventory $ 8,700 Work in Process Inventory 76,500 Finished Goods Inventory 53,000 Manufacturing Overhead - 0 - -------------------------------------------------------------------------------- During the month of January, all of the following occurred: 1. Direct labor costs were $45,000 for 1,800 hours worked. 2. Direct materials costing $28,000 and indirect materials costing $5,100 were purchased. 3. Sales commissions of $18,000 were earned by the sales force. 4. $23,000 worth of direct materials were used in production. 5. Advertising costs of $6,300 were incurred. 6. Factory supervisors earned salaries of $11,872. 7. Indirect labor costs for the month were $3,000. 8. Monthly depreciation on factory equipment was $4,500. 9. Utilities expense of $6,026 was incurred in the factory. 10. Luggage with manufacturing costs of $69,000 were transferred to finished goods. 11. Monthly insurance costs for the factory were $4,200. 12. $5,000 in property taxes on the factory were incurred and paid. 13. Luggage with manufacturing costs of $92,922 were sold for $168,949. a. Assume If Bags and Luggage assigns manufacturing overhead of $34,400, what will be the balances in the Direct Materials, Work in Process, and Finished Goods Inventory accounts at the end of January? (Input all amounts as positive values. Omit the "$" sign in your response.) Direct materials inventory $ Work in process inventory $ Finished goods inventory $ -------------------------------------------------------------------------------- b. As of January 31, what will be the balance in the Manufacturing Overhead account? (Input all amounts as positive values. Omit the "$" sign in your response.) Manufacturing overhead $ c. What was Bags and Luggage's operating income for January? (Input all amounts as positive values.Omit the "$" sign in your response.) Operating income $Explanation / Answer
a.
Direct materials inventory, Jan. 1
$8,700
Direct materials purchased
25,750
Less: Direct materials used in production
(26,000)
Direct materials inventory, Jan. 31
$8,450
Work in process inventory, Jan. 1
$76,500
Direct materials used
26,000
Direct labor used
42,000
Manufacturing overhead applied
32,400
Less: Finished goods transferred out
(69,000)
Work in process inventory, Jan. 31
$107,900
Finished goods inventory, Jan. 1
$53,000
Cost of finished goods transferred in
69,000
Less: Cost of goods sold
(89,000)
Finished goods inventory, Jan. 31
$33,000
b.
Manufacturing overhead, Jan. 1
$0
Indirect materials purchased
3,500
Supervisor salaries
12,000
Indirect labor costs
3,000
Depreciation
4,500
Factory utilities
7,800
Factory insurance
4,200
Property taxes on factory
3,000
Less: Manufacturing overhead applied
(32,400)
Manufacturing overhead, Jan. 31
$5,600
=============================
c.
Operating income for the month of January:
Revenues
$165,000
Cost of goods sold
(89,000)
Gross profit
76,000
Operating expenses:
Sales commissions
$16,500
Advertising expense
6,300
(22,800)
Operating income
$53,200
a.
Direct materials inventory, Jan. 1
$8,700
Direct materials purchased
25,750
Less: Direct materials used in production
(26,000)
Direct materials inventory, Jan. 31
$8,450
Work in process inventory, Jan. 1
$76,500
Direct materials used
26,000
Direct labor used
42,000
Manufacturing overhead applied
32,400
Less: Finished goods transferred out
(69,000)
Work in process inventory, Jan. 31
$107,900
Finished goods inventory, Jan. 1
$53,000
Cost of finished goods transferred in
69,000
Less: Cost of goods sold
(89,000)
Finished goods inventory, Jan. 31
$33,000
b.
Manufacturing overhead, Jan. 1
$0
Indirect materials purchased
3,500
Supervisor salaries
12,000
Indirect labor costs
3,000
Depreciation
4,500
Factory utilities
7,800
Factory insurance
4,200
Property taxes on factory
3,000
Less: Manufacturing overhead applied
(32,400)
Manufacturing overhead, Jan. 31
$5,600
=============================
c.
Operating income for the month of January:
Revenues
$165,000
Cost of goods sold
(89,000)
Gross profit
76,000
Operating expenses:
Sales commissions
$16,500
Advertising expense
6,300
(22,800)
Operating income
$53,200
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