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This study source was downloaded by 100000812122662 from CourseHero.com on 10-19-2021 06:51:26 GMT -05:00
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19. LO. 4 (Cost Accumulation) On September 25, 2010, a
hurricane destroyed the work in process inventory of Biloxi
Corporation. At that time, the company was in the process of
manufacturing two custom jobs (B325 and Q428). Although
all of Biloxi’s on-site accounting records were destroyed, the
following information is available from some backup off-site
records:
• Biloxi Corp. applies overhead at the rate of 85 percent of
direct labor cost.
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• The cost of goods sold for the company averages 75
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percent of selling price. Sales from January 1 to the date of
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the hurricane totaled $1,598,000.
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• The company’s wages rate for production employees is
$12.90 per hour. A total of 25,760 direct labor hours were
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on January 1.
• One job, R91, was completed and in the warehouse
awaiting shipment on September 25. The total cost of this job
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was $165,600.
Determine the following amounts:
a. Cost of goods sold for the year
b. Cost of goods manufactured during the year
c. Amount of applied overhead for each job in WIP inventory
d. Cost of WIP Inventory destroyed by the hurricane
e. Cost of RM Inventory destroyed by the hurricane
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Solution
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a. Cost of goods sold for the year.
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Sales from January 1 to the date of the hurricane totaled
$1,598,000.
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$165,600 = $1,295,200
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This study source was downloaded by 100000812122662 from CourseHero.com on 10-19-2021 06:51:26 GMT -05:00
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Job Q428 240 hours x $12.90 x 85% = $2,631.60
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$4,035.12
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Cost of WIP destroyed $25,034.72 $20,427.60
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$45,462.32
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Beginning WIP
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Overhead
= $1,326,062.32 - (25,760 hours x $12.90) - (25,760 hours x
$12.90 x 0.85)
= $1,326,062.32 - $332,304 - $282,458.40 = $711,299.92
This study source was downloaded by 100000812122662 from CourseHero.com on 10-19-2021 06:51:26 GMT -05:00
https://www.coursehero.com/file/46796077/19-LO-4-Cost-Accumulation-On-September-25-2010-a-hurricane-desdocx/
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This study source was downloaded by 100000812122662 from CourseHero.com on 10-19-2021 06:51:26 GMT -05:00
https://www.coursehero.com/file/46796077/19-LO-4-Cost-Accumulation-On-September-25-2010-a-hurricane-desdocx/
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