Larney Corporation uses process costing. A number of transactions that occurred

Question

Larney Corporation uses process costing. A number of transactions that occurred in June are listed below.

  

Raw materials that cost $40,200 are withdrawn from the storeroom for use in the Mixing Department. All of these raw materials are classified as direct materials.

Manufacturing overhead of $44,200 is applied in the Mixing Department using the department's predetermined overhead rate.

Units with a carrying cost of $114,200 finish processing in the Mixing Department and are transferred to the Drying Department for further processing.

Units with a carrying cost of $145,700 finish processing in the Drying Department, the final step in the production process, and are transferred to the finished goods warehouse.

  

Larney Corporation uses process costing. A number of transactions that occurred in June are listed below.

Explanation / Answer

Journal entries are shown below:

Date Particulars L.F Amount ($) Amount ($) (1) Work in Process- Mixing department 40,200    Raw material 40,200 (For raw material issued to production) (2) Work in process 38,200    Wages payable 38,200 (For direct labour costs incurred) (3) Work in Process- Mixing department 44,200    Manufacturing overhead 44,200 (For manufacturing overhead applied) (4) Work in process- Drying department 114,200    Work in Process- Mixing department 114,200 (For finished products transferred to drying department) (5) Finished Goods 145,700 Work in process- Drying department 145,700 (For goods from drying department transferred to finished goods) (6) Cost of goods sold 140,200    Finished goods 140,200 (For goods sold)

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