The Bags and Luggage Company had the following account balances as of January 1:

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 $50,000 for 1,800 hours worked. 2. Direct materials costing $25,000 and indirect materials costing $3,800 were purchased. 3. Sales commissions of $15,500 were earned by the sales force. 4. $24,000 worth of direct materials were used in production. 5. Advertising costs of $6,300 were incurred. 6. Factory supervisors earned salaries of $11,977. 7. Indirect labor costs for the month were $3,000. 8. Monthly depreciation on factory equipment was $4,500. 9. Utilities expense of $5,411 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 $89,822 were sold for $163,312. 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 $ check my work

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

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