The following information is available for Lock-Safe Company, which produces special-order security products and uses a job order cost accounting system.

The following information is available for Lock-Safe Company, which produces special-order security products and uses a job order cost accounting system.

 

	April 30		May 31
Inventories
Raw materials	$	34,000	$	51,000
Goods in process		9,500		20,700
Finished goods		67,000		33,600
Activities and information for May
Raw materials purchases (paid with cash)				172,000
Factory payroll (paid with cash)				210,000
Factory overhead
Indirect materials				10,000
Indirect labor				74,000
Other overhead costs				99,000
Sales (received in cash)				1,100,000
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. Explanation:            1.  Cost of direct materials used             Beginning raw materials inventory $ 34,000         Plus purchases   172,000             Raw materials available   206,000         Less ending raw materials inventory   (51,000 )           Total raw materials used   155,000         Less indirect materials used   (10,000 )           Cost of direct materials used $ 145,000                  2.  Cost of direct labor used             Total factory payroll $ 210,000         Less indirect labor   (74,000 )           Cost of direct labor used $ 136,000                  3.  Cost of goods manufactured             Beginning goods in process inventory $ 9,500         Plus direct materials   145,000         Plus direct labor   136,000         Plus overhead applied (55%)   74,800             Total cost of goods in process   365,300         Less ending goods in process inventory   (20,700 )           Cost of goods manufactured $ 344,600                  4.  Cost of goods sold             Beginning finished goods inventory $ 67,000         Plus: Cost of goods manufactured   344,600         Less ending finished goods inventory   (33,600 )           Cost of goods sold $ 378,000                  5.  Gross profit             Sales $ 1,100,000         Cost of goods sold   (378,000 )           Gross profit $ 722,000                  6.  Overapplied or underapplied overhead             Indirect materials $ 10,000         Indirect labor   74,000         Other overhead costs   99,000             Total actual overhead incurred   183,000         Overhead applied   74,800            Underapplied overhead $ 108,200