Question

ALABAMA CORPORATION

The company manufactures a single product, cleverly named Product X. The following information is available for the calendar year 2018 just completed, during which they produced and sold 200,000 units. Sales for the year was $2,400,000. During the year, the company paid a sales commission of 5 percent of sales. The corporate income tax rate was 20%.

Direct materials purchases		$300,000
Direct labor		140,000
Depreciation - factory equipment		45,000
Depreciation - factory building		30,000
Depreciation - headquarters building		50,000
Factory insurance		15,000
Property taxes:
Factory		20,000
Headquarters		18,000
Utilities - factory		34,000
Utilities - sales		1,800
Administrative salaries		150,000
Indirect labor salaries		156,000
Sales office salaries		90,000

Inventory Information	12/31/2017	12/31/2018
Raw materials	$124,000	$152,000
Work in process	124,000	130,000
Finished Goods	109,000	118,904

REQUIRED:

1. Post all of the above a summary entries in T accounts.
2. Compute the direct materials used in production..
3. Compute the conversion cost.
4. Prepare the Schedule of Direct Materials Used

Answer 1

Schedule of Direct materials used

Particulars	Amount
Beginning direct material	124000
Add Direct materials purchases	300000
Direct materials available for production	424000
Less Ending direct materials	152000
Direct materials used	272000

Direct materials used in product is 272000

Conversion cost

Conversion costs are any cost that used to convert the direct materials into finished goods.

Schedule of conversion cost

Particulars	Amount
Direct labour	140000
Depreciation on factory equipment	45000
Depreciation on factory building	30000
Factory insurance	15000
Factory property tax	20000
Factory utilities	34000
Indirect labour	156000
Conversion cost	440000

Conversion cost of the company is 440000.

The above are the detailed calculations and explanations

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