Question

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The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.

	April 30				May 31
Inventories
Raw materials	$	40,000			$	50,000
Work in process		9,100				18,500
Finished goods		60,000				33,200
Activities and information for May
Raw materials purchases (paid with cash)						173,000
Factory payroll (paid with cash)						300,000
Factory overhead
Indirect materials						14,000
Indirect labor						69,000
Other overhead costs						96,000
Sales (received in cash)						1,900,000
Predetermined overhead rate based on direct labor cost						55	%

Compute the following amounts for the month of May using T-accounts.

1. Cost of direct materials used.
2. Cost of direct labor used.
3. Cost of goods manufactured.
4. Cost of goods sold.*
5. Gross profit.
6. Overapplied or underapplied overhead.

  
*Do not consider any underapplied or overapplied overhead.

Answer 1

	Raw materials (RM)						Work in Process (WIP)
RM-April 30	40000					WIP-April 30	9100
RM purchases	173000					DM used	149000
		14000	Indirect materials			DL used	231000
		149000	DM used			Overhead applied	127050	497650	Cost of goods manuf.
RM-May 31	50000					WIP-May 31	18500
	Finished goods (FG)						Factory Overhead
FG-April 30	60000					Indirect materials	14000	127050	Overhead applied
Cost of goods manuf.	497650					Indirect labor	69000
		524450	Cost of goods sold			Other overhead costs	96000
FG-May 31	33200
						Underapplied OH	51950
Income Statement (Partial)
Sales	1900000
Cost of goods sold	524450
Gross Profit	1375550