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During the year, the following events occurred: Drew Corp. designs and manufactu

ID: 2735044 • Letter: D

Question


During the year, the following events occurred:

Drew Corp. designs and manufactures mascot uniforms for high school, college, and professional sports teams. Since each team’s uniform is unique in color and design, Drew uses a job order costing system. On January 1, the T-accounts for some of Drew’s primary balance sheet accounts were as follows: Raw Materials Inventory: Beg 15,000

Work IN process Inventory: Beg. 31,000 65,100 (credit of 326,000) 234,000 130,000 Bal. 134,100

Accounts Rec. Beg: 56,000

Accounts Pay: Beg: 42,000

Finished Goods: Beg: 22,000 326000 (credit of 303750) Bal. 44,250

Cost of Goods Sold: Beg 0 303,750 Bal. 303,750

Cash: Beg 32,000

Calculate under-or overapplied overhead for the year: ? Assuming that Drew closes under-or overapplied overhead to Cost of Goods Sold for the year: Adjusted cost of goods sold? Assuming that Drew prorates under- or overapplied overhead to the appropriate Work in Process Invetory, Finished Goods Inventory, and Cost of Goods Sold: Adjusted Balance: Work in Process: ? Finished Goods: ? Cost of Goods Sold?

Raw Materials Inventory Work in Process Inventory Beg. 15,000 Beg. 31,000 65,100 326,000 234,000     130,000 134,100

Explanation / Answer

Answer:

(a)

(b)

(c)

Now over-applied $7,100 should be allocated between work in progress inventory and transferred to finished goods.

Adjusted Work in progress inventory = 134,100 - (7100* 134,100 / 460,100) = $132,030.65

Goods transferred to finished goods = 326,000 - (7100* 326,000 / 460,100) = $ 320,969.35

Adjusted finished inventory = 22,000 + 320,969.35 * (44,250 / 22,000+326,000) = $43,610.37

Cost of goods sold = 22,000 + 320,969.35 * (303,750 / 22,000+326,000) = $ 299,359.03


Amount $ Indirect materials          27,900 Indirect labor          25,000 Other manufacturing overhead          70,000 Total actual       122,900 Applied       130,000 Over-applied = Applied - Actual            7,100

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