| The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system. |
the following information is available for lock tite company
| April 30 | May 31 | ||||
| Inventories | |||||
| Raw materials | $ | 42,000 | $ | 38,000 | |
| Work in process | 9,800 | 18,200 | |||
| Finished goods | 63,000 | 33,000 | |||
| Activities and information for May | |||||
| Raw materials purchases (paid with cash) | 194,000 | ||||
| Factory payroll (paid with cash) | 330,000 | ||||
| Factory overhead | |||||
| Indirect materials | 13,000 | ||||
| Indirect labor | 65,000 | ||||
| Other overhead costs | 111,000 | ||||
| Sales (received in cash) | 1,200,000 | ||||
| Predetermined overhead rate based on direct labor cost | 55 | % | |||
| Compute the following amounts for the month of May using T-accounts. |
| 1. | Cost of direct materials used. |
| 2. | Cost of direct labor used. |
| 3. | Cost of goods manufactured. |
| 4. | Cost of goods sold.* |
| 5. | Gross profit. |
| 6. | Overapplied or underapplied overhead. |
| *Do not consider any underapplied or overapplied overhead. |
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T-Accounts :
| RAW MATERIAL A/C : | |||
| DEBIT | AMOUNT $ | CREDIT | AMOUNT $ |
| OB | 42000 | F overhead | 13000 |
| RM purchased | 194000 | DM used | 185000 |
| CB | 38000 | ||
| Total | 236000 | Total | 236000 |
| WIP ACCOUNT : | |||
| OB | 9800 | COGM | 587350 |
| DM COST (balance of Mat A/c) | 185000 | CB | 18200 |
| DL COST (balance of Fac. Payroll) | 265000 | ||
| Overhead allocated (55% of DL cost) | 145750 | ||
| Total | 605550 | Total | 605550 |
| FACTORY PAYROLL ACCOUNT : | |||
| Labor cost paid | 330000 | Indirect labor | 65000 |
| DL used | 265000 | ||
| Total | 330000 | Total | 330000 |
| FINISHED GOODS ACCOUNT : | |||
| OB | 63000 | COGS | 617350 |
| COGM | 587350 | CB | 33000 |
| Total | 650350 | Total | 650350 |
| FACTORY OVERHEAD ACCOUNT : | |||
| Indirect Material | 13000 | WIP (overhead applied) (55% of DL cost) | 145750 |
| indirect Labor | 65000 | Under-applied overhead | 43250 |
| other costs | 111000 | ||
| Total | 189000 | 189000 | |
Calculation of the figure :
| 1. | Cost of direct materials used= $185000 (as per Raw Material account) |
| 2. | Cost of direct labor used = $265000 (as per Factory payroll account) |
| 3. | Cost of goods manufactured = $587350 (as per WIP account) |
| 4. | Cost of goods sold = $617350 (as per Finished Goods account) |
| 5. | Gross profit = Sales – COGS = $1200000 – $617350 = $582650 |
| 6. | Overapplied or underapplied overhead = Under applied overhead $43250 (as per Factory Overhead a/c) |
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