# Direct labor 40000 eup x 10080 per eup 4032000 total

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Direct labor (40,000 EUP x \$100.80 per EUP)....4,032,000Total costs transferred out.................................\$5,432,000Cost of ending goods in processDirect materials (4,000 EUP x \$35.00 per EUP).140,000Direct labor (1,000 EUP x \$100.80 per EUP)......100,800Total costs of ending goods in process............240,800Total costs accounted for*...................................\$5,672,800*This equals the sum of the total direct materials cost and the total direct labor costs(\$1,540,000 + \$4,132,800 = \$5,672,800).3-36
Chapter 03 - Process Costing and AnalysisProblem 3-2B(Concluded)Part 4MEMORANDUMTO:FROM:DATE:RE:Percentage of Completion Error AnalysisIf the units in ending inventory are actually 75% complete instead of 30%with respect to labor, the number of equivalent units in ending inventorywith respect to labor is understated, and the total equivalent unitsproduced for the period is also understated. If the correct percentage ofcompletion with respect to labor (75%) were used, the direct labor costper equivalent unit would be smaller.This would decrease the total costof goods transferred out.The total cost of ending goods in processwould increase due to the larger number of equivalent units of laborremaining in ending inventory.Regarding financial statements, this error causes an overstatement ofcost of goods sold and an understatement of net income on the incomestatement for April.On the April 30 balance sheet, the goods in processinventory and retained earnings are understated; therefore total assetsand equity are also understated.3-37
Chapter 03 - Process Costing and AnalysisProblem 3-3B (60 minutes)Part 1a.Mar. 31Raw Materials Inventory...............................110,560Accounts Payable....................................110,560Raw materials purchased.b.Mar. 31Goods in Process Inventory.........................98,560Raw Materials Inventory..........................98,560Direct materials used in production.c.Mar. 31Factory Overhead..........................................20,280Raw Materials Inventory..........................20,280Indirect materials used.d.Mar. 31Factory Payroll..............................................80,000Cash..........................................................80,000Factory payroll costs.e.Mar. 31Goods in Process Inventory.........................61,840Factory Payroll.........................................61,840Direct labor used in production.f.Mar. 31Factory Overhead..........................................18,160Factory Payroll.........................................18,160Indirect labor used.g.Mar. 31Factory Overhead..........................................17,216Other Accounts........................................17,216Other overhead costs.h.Mar. 31Goods in Process Inventory.........................55,656Factory Overhead....................................55,656Application of overhead at 90% ofdirect labor cost.3-38
Chapter 03 - Process Costing and AnalysisProblem 3-3B(Continued)i.Mar. 31Finished Goods Inventory.............................195,520Goods in Process Inventory....................195,520Transfer goods to finished goods.j.Mar. 31Cash...............................................................1,125,000Sales.........................................................1,125,000Sales of finished goods.(45,000 x \$25)Mar. 31Cost of Goods Sold.......................................225,000Finished Goods Inventory.......................225,000Cost of goods sold.Part 2YING COMPANYProcess Cost SummaryFor Month Ended March 31Costs charged to productionCosts of beginning goods in processDirect materials...............................................................\$2,240Direct labor......................................................................1,410Factory overhead.............................................................1,269\$4,919Costs incurred this periodDirect materials...............................................................98,560Direct labor......................................................................61,840Factory overhead.............................................................55,656216,056Total costs to account for.................................................\$220,975Unit cost informationUnits to account forUnits accounted forBeginning goods in process..8,000Completed & transferred out.26,000Units started this period.........24,000Ending goods in process......6,000Total units to account for.......32,000Total units accounted for......32,000[Continued on next page]3-39
Chapter 03 - Process Costing and AnalysisProblem 3-3B(Concluded)Equivalent units of productionDirect

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