[The following information applies to the questions displayed below] Sierra Comp

Question

[The following information applies to the questions displayed below] Sierra Company manufactures woven blankets and accounts for product costs using process costing. The company uses a single processing department. The following information is available regarding its May inventories Raw materials inventory Work in process inventory Finished goods inventory Beginning Inventory S 61,000 419,500 614,000 Ending Inventory $ 70,500 531,000 430,001 The following additional information describes the company's production activities for May Raw materials purchases (on credit) Factory payroll cost (paid in cash) Other overhead cost (Other Accounts 280,000 1,541,000 67,500 credited) Materials used Direct Indirect 180,500 90,000 Labor used Direct Indirect 790,000 751,000 115% Overhead rate as a percent of direct labor Sales (on credit) 5,500,000 The predetermined overhead rate was computed at the beginning of the year as 115% of direct labor cost

Explanation / Answer

Solution: Computation of cost of goods manufactured and cost of goods sold:

Journal entries:

Direct material used $    1,80,500.00 Direct labour used $    7,90,000.00 Overhead applied $    9,08,500.00 Total manufacturing cost $ 18,79,000.00 Goods in process(beg) $    4,19,500.00 Goods in process(end) $    5,31,000.00 Cost of goods manufactured $ 17,67,500.00 finished goods(beg) $    6,14,000.00 finished goods(end) $    4,30,001.00 Cost of goods sold $ 19,51,499.00

Journal entries:

date journal entries debit credit may 31 raw material inventory 280000 accounts payable 280000 goods in process inventory 180500 raw material inventory 180500 factory overhead 90000 raw material inventory 90000 goods in process inventory 790000 factory payroll 790000 factory overhead 751000 factory payroll 751000 factory payroll 1541000 cash 1541000 overhead cost 67500 other accounts 67500 work in process 908500 manufacturing overhead 908500 finished goods inventory 1767500 goods in process inventory 1767500 cost of goods sold expense 19,51,499 finished inventory 19,51,499

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