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Gray Manufacturing Company makes pennants for college and university athletic teams. The company uses a process costing system to accumulate product costs as the pennants move through the two stages of production: cutting and silk-screening. All materials are added at the beginning of both cutting and silk-screening processes, while conversion costs are applied evenly throughout the process."
At the beginning of September, the Cutting Department had 1,000 pennants in process that were 50% complete. The company had incurred $1,300 in direct materials cost and $1,250 in conversion cost to make them. During the month the department added $13,195 more of direct materials and $32,875 in conversion costs. A total of 9,150 pennants were finished during September and transferred to the Silk-screening Department. At the end of the month, 2,000 pennants that were 30% complete, remained in the Cutting Department.
The income statement of a proprietorship for the month of December indicates a net income of $75,000. During the same period, the owner withdrew $100,000 in cash from the business for personal use.
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