Reference no: EM131538667
Question: Major League Bat Company manufactures baseball bats. In addition to its goods in process inventories, the company maintains inventories of raw materials and finished goods. It uses raw materials as direct materials in production and as indirect materials. Its factory payroll costs include direct labor for production and indirect labor. All materials are added at the beginning of the process, and direct labor and factory overhead are applied uniformly throughout the production process. Required You are to maintain records and produce measures of inventories to reflect the July events of this company. Set up the following general ledger accounts and enter the June 30 balances: Raw Materials Inventory, $25,000; Goods in Process Inventory, $8,135 ($2,660 of direct materials, $3,650 of direct labor, and $1,825 of overhead); Finished Goods Inventory, $110,000; Sales, $0; Cost of Goods Sold, $0; Factory Payroll, $0; and Factory Overhead, $0.
1. Prepare journal entries to record the following July transactions and events.
a. Purchased raw materials for $125,000 cash (the company uses a perpetual inventory system).
b. Used raw materials as follows: direct materials, $52,440; and indirect materials, $10,000.
c. Incurred factory payroll cost of $227,250 paid in cash (ignore taxes).
d. Assigned factory payroll costs as follows: direct labor, $202,250; and indirect labor, $25,000.
e. Incurred additional factory overhead costs of $80,000 paid in cash.
f. Allocated factory overhead to production at 50% of direct labor costs.
2. Information about the July inventories follows. Use this information with that from part 1 to prepare a process cost summary, assuming the weighted-average method is used.
3. Using the results from part 2 and the available information, make computations and prepare journal entries to record the following:
a. Total costs transferred to finished goods for July (label this entry g).
b. Sale of finished goods costing $265,700 for $625,000 in cash (label this entry h).
4. Post entries from parts 1 and 3 to the ledger accounts set up at the beginning of the problem.
5. Compute the amount of gross profit from the sales in July. (Note: Add any underapplied overhead to, or deduct any overapplied overhead from, the cost of goods sold. Ignore the corresponding journal entry.)