Reference no: EM132680558
The Mezcal Manufacturing Company has a mature JIT production system with average cycle time of less than one day. Total time from receipt of raw materials to completion of finished product is less than three days. The company uses a finished goods account and a combined raw and in process (RIP) inventory account; there is a separate account, entitled Supplies, for indirect factory materials. The company expenses all conversion costs to the cost of goods sold account. At the end of each month, all inventories are counted, their conversion costs components are estimated, and inventory account balances are adjusted accordingly. Raw material cost is backflushed from RIP to Finished Goods and from Finished Goods to Cost of Goods Sold.
The following information is a summary of selected transactions and other information for May:
Beginning balances in inventory accounts:
Raw and In Process $ 31,300
Finished Goods 280,000
Supplies 27,000
The May 1 RIP balance consisted of a $30,000 cost of materials, most of which were not yet in process, plus a $1,300 conversion cost estimate assigned to partially processed work. The Finished Goods balance consisted of $150,000 material cost and a $130,000 estimate of conversion cost.
May 31 inventories based on physical count:
Raw and In Process $ 37,100
Finished Goods 294,000
Supplies 17,000
The May 31 RIP amount consisted of a $35,000 cost of materials, most of which were not yet in process, plus a $2,100 conversion cost estimate assigned to partially processed work. The Finished Goods amount consisted of $160,000 material cost and a $134,000 estimate of conversion cost.
a. Direct materials received on credit cost $620,000.
b. Indirect materials used cost $10,000.
c. Gross payroll of $300,000 was recorded; The payroll was paid.
d. The payroll distribution was:
Direct labor $ 50,000
Indirect factory labor 90,000
Marketing salaries 90,000
Administrative salaries 70,000
e. Factory overhead costs:
Depreciation $ 514,000
Insurance 9,000
f. Miscellaneous factory overhead costs:
Paid in cash $ 26,000
On account 7,000
g. The materials cost component of completed work is backflushed from RIP.
h. The materials cost component of work sold is backflushed from Finished Goods.
i. Ending balances are established in inventory accounts by adjusting their conversion cost components.
Required:
Problem 1. Prepare all the necessary journal entries for the following transactions.
Problem 2. Determine the amount of materials to backflushed from RIP to Finished Goods.
Problem 3. Determine the amount of materials to backflushed from Finished Goods to Cost of Goods sold.
Problem 4. Determine the amount to be adjusted to RIP and Finished Goods with respect to conversion costs.
Problem 5. Determine the amount of cost of goods sold.