Question

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	$	28,000			$	33,000
Work in process		9,700				20,500
Finished goods		68,000				34,400
Activities and information for May
Raw materials purchases (paid with cash)						180,000
Factory payroll (paid with cash)						150,000
Factory overhead
Indirect materials						12,000
Indirect labor						34,500
Other overhead costs						98,000
Sales (received in cash)						1,600,000
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

Particulars $

Direct materials used:

Opening Raw materials 28,000

Add: Purchases 180,000

Less: Closing Raw materials (33,000)

175,000

Add: Direct labor cost    82,500   

Prime cost 257,500

Factory overhead :

Indirect materials 12,000

Indirect labor 34,400

Add : Work in process opening 9,700

Less : Work in process closing (20,500)

Factory cost 293,100          

Office and administration overhead:

Finished goods opening 68,000

Less : Finished goods closing (34,400)

Cost of goods sold 326,700

Add : Other overhead 98,000

  Cost of sales 424,700

Gross Profit 1,175,300   

Sales 1,600,000