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Flow of Costs through Manufacturing Accounts

Please see the attached file.
Stone Tools, Inc., had the following account balances as of January 1:

Direct Materials Inventory $8,700.00
Work in Process Inventory $76,500.00
Finished Goods Inventory $53,000.00
Manufacturing Overhead $-

During the month of January, all of the following occurred:
1. Direct labor costs were $42,000 for 1,800 hours worked.
2. Direct materials costing $25,750 and indirect materials costing $3,500 were purchased.
3. Sales commissions of $16,500 were earned by the sales force.
4. $26,000 worth of direct materials were used in production.
5. Advertising costs of $6,300 were incurred.
6. Factory supervisors earned salaries of $12,000.
7. Indirect labor costs for the month were $3,000.
8. Monthly depreciation on factory equipment was $4,500.
9. Utilities expense of $7,800 was incurred in the factory.
10. Tools with manufacturing costs of $69,000 were transferred to finished goods.
11. Monthly insurance costs for the factory were $4,200.
12. $3,000 in property taxes on the factory were incurred and paid.
13. Tools with manufacturing costs of $89,000 were sold for $165,000.

Instructions
a. If Stone assigns manufacturing overhead of $32,400, what will be the balances in the Direct
Materials, Work in Process, and Finished Goods Inventory accounts at the end of January?
b. As of January 31, what will be the balance in the manufacturing Overhead account?
c. What was Stone's operating income for January?

Attachments

Solution Preview

Please see the attached file.

Stone Tools, Inc., had the following account balances as of January 1:

Direct Materials Inventory $8,700.00
Work in Process Inventory $76,500.00
Finished Goods Inventory $53,000.00
Manufacturing Overhead $-

During the month of January, all of the following occurred:
1. Direct labor costs were $42,000 for 1,800 hours worked.
2. Direct materials costing $25,750 and indirect materials costing $3,500 were purchased.
3. Sales commissions of $16,500 were earned by the sales force.
4. $26,000 worth of direct materials were used in production.
5. Advertising costs of $6,300 were incurred.
6. Factory supervisors earned salaries of $12,000.
7. Indirect labor costs for the month were $3,000.
8. ...

Solution Summary

The solution explains how to calculate the ending balances in the manufacturing accounts and then how to prepare the income statement

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