Question 1:
| Work in process, 1 July – 336 000 units | 40% complete | 336 000 units |
| Work in process, 31 July | 80% complete | 100 000 units |
| Units started during July 2014 | 200 000 units | |
| Cost of Work in Process 1 July 2014 | ||
| Direct Materials | $798,000 | |
| Conversion Costs | $ 90,000 | $ 888,000 |
| Costs incurred during the month of July 2014 | ||
| Direct material | $ 810 000 | |
| Conversion costs | $ 942 000 | $ 1,752,000 |
Required:
1. Calculate the cost of goods completed and transferred out for the month of July 2014
2. Calculate the cost of work in process inventory as at 31 July 2014.
3. Prepare a journal entry as at 31 July 2014, to record the transfer of goods completed and transferred out in July 2014
Answer:
1.| Unit started During July 2014 | 200000 |
| Cost incurred during the month July 2014 | 1752000 |
| Cost per Unit | 8.76 |
1.Cost of goods sold
| Cost of Goods sold | |
| Cost of Beginning finished goods inventory | 2943360 |
| Purchases or cost of goods manufactured | 888000 |
| Cost of ending finished goods inventory | 1752000 |
| Cost of goods sold | 2079360 |
2. Cost of work in process inventory as at 31 July 2014
| Cost of work in process | |
| Work in process 31 July (Unit) | 100000 |
| Work in process 31 July (Unit) | 876000 |
| Cost of work in process 1 July 2014 | 1752000 |
| Cost of work in process inventory 31 July | 876000 |
| Date 2014 | Particulars | Amount Debit | Amount Credit |
| 1 July | Work in process a/c dr. To assembly account payable (direct material was purchased and added it in the beginning) | 798000 | 798000 |
| 1 July | Work in process ac dr. To assembly various a/c (conversion cost is occurred uniformly throughout the process) | ||
| 31 July | Work in process – testing a/c dr. To work in process assembly a/c (to record 100000 units are completed and transferred from assembly to testing) | 1752000 | 1752000 |
2.
1. Sale Budget
| Sale Budget | ||
| Sale budget | January | |
| Box type C | Box type P | |
| Budgeted sale ($) | 135 | 195 |
| Unit Selling Price (BOXES) | 400000 | 600000 |
| Total Budgeted Sales | 54000000 | 117000000 |
2. Production Budget
| Production Budget | January | |
| Box type C | Box type P | |
| Budgeted sale | 135 | 195 |
| Add: Desired ending Inventory | 5000 | 15000 |
| Total Need | 5135 | 15195 |
| Less: Beginning inventory | 10000 | 20000 |
| Required Production | 4865 | 4805 |
3. Direct Material Budget
| Direct Material Budget | January | |
| Box type C | Box type P | |
| Amount of raw material required for production | 100 | 100 |
| Number of raw materials desired in ending inventory | ||
| 1.Paper board | 5000 | 5000 |
| 2. Corrugating Medium | 10000 | 10000 |
| Total Number of raw material required | 15100 | 15100 |
| Less Amount of raw materials in beginning inventory | ||
| 1.Paper board | 15000 | 15000 |
| 2. Corrugating Medium | 5000 | 5000 |
| Amount of raw material to purchase | 4900 | 4900 |
| Cost per Raw Material | 36.296296 | 25.128205 |
4. Direct Labour Budget
| Direct Labor Budget | ||
| January | ||
| Box C | Box P | |
| Unit of production | 4865 | 4805 |
| Direct labor per unit | 0.25 | 0.5 |
| Direct Labor needed for production | 1216.25 | 2402.5 |
| Direct labor cost per hour | 18 | 18 |
| Budgeted Direct labor cost | 21892.5 | 43245 |
| Direct Labor Budget | 21892.5 | 43245 |
5. Manufacturing overhead Budget
| Month | January | |
| Box type C | Box type P | |
| Unit of production | 4865 | 4805 |
| Total Unit of Production | 9670 | |
| Variable Overhead costs | ||
| Indirect labor(61.43) | 75000 | |
| Indirect Material | 15750 | |
| Insurance | 24000 | |
| Total Variable Cost | 114750 | |
| Fixed Overhead Cost | ||
| Land and Council Taxws | 27000 | |
| Utilities | 37500 | |
| Total Fixed overhead cost | 64500 | |
| Total Overhead cost | 179250 | |
| Deduct Depreciation | 43500 | |
| Cash Disbursement for Manufacturing | 135750 | |
| Manufacturing overhead per unit | 14.0382627 |
6. Selling and Administrative expense budget
| Selling and Administrative Expense Budget | January |
| Fixed Selling Expense | |
| Salaries of sales personnel | 112500 |
| management Salaries | 135000 |
| Clerical Wages | 39000 |
| Variable Selling Expense | |
| Miscellaneous Administrative Expense | 6000 |
| Advertisement | 22500 |
| Selling and Administrative Expense Budget | 315000 |
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