Question

Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information is available regarding its May inventories Beginning Inventory Ending Inventory Raw materials inventory $60,000 $92,000 Work in process inventory 413,500 595,000 Finished goods inventory 633,000 591,000 The following additional information describes the company's production activities for May. Raw materials purchases (on credit) $270,000 Factory wages cost (paid in cash) 1,597,000 Other overhead cost (Other Accounts credited) 63,000 Materials used Direct $178,000 Indirect 60,000 Labor used Direct $800,000 Indirect 797,000 Overhead rate as a percent of direct labor 115% Sales (on credit) $6,500,000 The predetermined overhead rate was computed at the beginning of the year as 115% of direct labor cost. rev: 09_05_2017_QC_CS-97362 Problem 20-1A Part 1 Required: 1. Compute the cost of products transferred from production to finished goods and cost of goods sold.

Answer 1

Raw materials (RM)					Work in process (WIP)
					Beg bal	413,500	Trsfd	1,716,500
Beg bal	60,000	Direct M	178,000		DM used	178,000
purchases	270,000	indirect mat	60,000		DL used	800,000
					OH applied	920000
ending bal	92,000
					end bal	595,000
Factory wages payable					finished goods (FG)
cash	1,597,000	dL used	800,000		beg bal	633,000	COGS	1,758,500
		indirect la	797,000		Tsfd	1,716,500
end bal	0				end bal	591,000
Factory overhead					income statement (partial)
other	63,000	oh applied	920,000		Sales			6,500,000
indirct mat	60,000				cost of goods sold			1,758,500
indirect la	797,000				Gross margin			4,741,500
end bal	0	0
					Cost of goods transferred			1,716,500
					Cost of goods sold			1,758,500