Schrager Company has two production departments: Cutting and Assembly. July 1 in

Question

Schrager Company has two production departments: Cutting and Assembly. July 1 inventories are Raw Materials $4,200, Work in Process—Cutting $2,900, Work in Process—Assembly $10,600, and Finished Goods $31,000. During July, the following transactions occurred. 1. Purchased $62,500 of raw materials on account. 2. Incurred $60,000 of factory labor. (Credit Wages Payable.) 3. Incurred $70,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid. 4. Requisitioned materials for Cutting $15,700 and Assembly $8,900. 5. Used factory labor for Cutting $33,000 and Assembly $27,000. 6. Applied overhead at the rate of $18 per machine hour. Machine hours were Cutting 1,680 and Assembly 1,720. 7. Transferred goods costing $67,600 from the Cutting Department to the Assembly Department. 8. Transferred goods costing $134,900 from Assembly to Finished Goods. 9. Sold goods costing $150,000 for $200,000 on account. Instructions Journalize the transactions. (Omit explanations.)

Explanation / Answer

In point 5 you refer to "factory labour", which is wrong, it should be "direct labour". Factory labour makes it sound like indirect labour (and thus it would be included in overhead ( point 3 ) ).

1.
In point 5 you refer to "factory labour", which is wrong, it should be "direct labour". Factory labour makes it sound like indirect labour (and thus it would be included in overhead ( point 3 )

1)
Raw Materials(db) 62,500
Accounts Payable(cr) 62,500

2)
Factory labor(db) 60,000
Wages payable (cr) 60,000

3)
Overhead (db) 70,000
Cash (cr) 40,000
overhead Payables(cr) 30,000

4.

WIP - Cutting (db) 15,700
WIP - Assembly (db) 8,900
Raw Materials (cr) 24,600

5.

WIP - Cutting (db) 33,000
WIP - Assembly(db) 27,000
Wages Payable (cr) 60,000

6.

WIP - Cutting(db) 30,240 ( 18 x 1680)
WIP - Assembly(db) 30,960 ( 18 x 1720)
Overhead (cr) 61,200

7.

WIP - Assembly(db) 67,600
WIP - Cutting (cr) 67,600

8.
Finished Goods(db) 134,900
WIP- Assembly (cr) 134,900

9.
Accounts Recievable (db) 200,000
Sales Revenue (cr)200,000

COGS (db) 150,000
Finished Goods (cr) 150,000

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