Question

Partially completed T-accounts and additional information for Cardinals, Inc., for the month of November appear as follows.

Materials Inventory
BB (11/1)	41,000
	131,000	100,000

Work-In-Process Inventory
BB (11/1)	71,000
Labor	60,000

Finished Goods Inventory
BB (11/1)	91,000
	191,000	131,000

Cost of Goods Sold

Manufacturing Overhead Control
	89,000

Applied Manufacturing Overhead

Additional information for November follows:

• Labor wage rate was $20 per hour.
• Manufacturing overhead is applied at $24 per direct labor-hour.
• During the month, sales revenue was $325,000, and selling and administrative costs were $59,000.
• This company has no indirect materials or supplies.

Required:

a. What cost amount of direct materials was issued to production during November?

b. How much manufacturing overhead was applied to products during November?

c. What was the cost of products completed during November?

d. What was the balance of the Work-in-Process Inventory account at the end of November?

e. What was the over- or underapplied manufacturing overhead for November?

f. What was the operating profit (loss) for November? Any over- or underapplied overhead is written off to Cost of Goods Sold.

Answer 1

a.

Cost of direct material issued to production = $100,000

b.

Direct labor hours = Direct labor cost / Wage rate per hour

Direct labor hours = $60,000/$20 = 3,000 hours

Manufacturing overhead applied = 3,000*$24 = $72,000

c.

Cost of product completed = $191,000

d.

Ending balance in work in process = Beginning balance+direct material issued+direct labor+manufacturing overhead applied-cost of product completed

Ending balance in work in process = $71,000+100,000+60,000+72,000 - 191,000 = $112,000

e.

Over or under applied overhead = Actual overhead - applied overhead

Under applied overhead = $89,000 - 72,000 = $17,000

f.

Sales		$325,000
Cost of goods sold -un adjusted	131,000
Add:Under applied overhead	17,000
Cost of goods sold - Adjusted		148,000
Gross profit		177,000
Selling and administrative cost		59,000
Operating profit		$118,000