Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 23

Finding Missing Data

A new computer virus (AcctBGone) destroyed most of the company records at BackupsRntUs. The computer experts at the company could recover only a few fragments of the company’s factory ledger for February as follows:

Further investigation and reconstruction from other sources yielded the following additional

information.

• The controller remembers clearly that actual manufacturing overhead costs are recorded at $18 per direct labor-hour. (The company assigns actual overhead to Work-in-Process Inventory.)

• The production superintendent’s cost sheets showed only one job in Work-in-Process Inventory on February 29. Materials of $15,600 had been added to the job, and 300 direct labor-hours had been expended at $36 per hour.

• The Accounts Payable are for direct materials purchases only, according to the accounts payable clerk. He clearly remembers that the balance in the account was $36,000 on February 1. An analysis of canceled checks (kept in the treasurer’s office) shows that payments of $252,000 were made to suppliers during the month.

• The payroll ledger shows that 5,200 direct labor-hours were recorded for the month. The employment department has verified that there are no variations in pay rates among employees (this infuriated Steve Fung, who believed that his services were underpaid).

• Records maintained in the finished goods warehouse indicate that the finished goods inventory totaled $108,000 on February 1.

• The cost of goods manufactured in February was $564,000.

Required

Determine the following amounts:

a. Work-in-process inventory, February 29.

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b. Direct materials purchased during February.

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c. Actual manufacturing overhead incurred during February.

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d. Cost of goods sold for February.

Step 1 of 4

(a) Determine the work-in-process inventory as on February 29:

The work-in-process inventory is the amount of inventory is still in the process. It is very crucial for production process. To determine the ending balance of the work-in-process inventory account, add direct materials, direct labour and applied manufacturing overhead to the opening balance of work-in-process inventory account.

Prepare the T-account of work-in-process inventory account, to determine the ending balance of work-in-process account:

Hence, the work-in-process inventory as on February 29 is $26,400.