Biro Manufacturing started 2005 with the following account balances.
Raw Materials Inventory 960
Work in Process Inventory 640
Finished Goods Inventory (320 inits @ $5) 1,600
Common Stock 1,600
Retained Earnings 2,400
Transactions during 2005
1. Purchased 2,304 of raw materials with cash
2. Transferred 3,000 of raw materials to the production department
3. Incurred and paid cash for 180 hours of direct labor @ 12.80 per hour
4. Applied Overhead costs to the work in process inventory account. The predetermined overhead rate is 13.20 per direct labor hour.
5. Incurred actual overhead costs on 2,400 cash.
6. Completed work on 1,200 units for 5.12 per unit
7. Paid 1,200 in selling and administrative expenses in cash
8. Sold 1,200 units for,680 cash revenue (assume FIFO cost flow)
Biro charges overapplied or underapplied overhead directly to Cost of Goods Sold.
A. Record the preceding events in a horizontal statements model. Also designate the classification of cash flows using the letters OA for operating activities, IA for investing activities, and FA for financial activities.
The solution explains the total manufacturing cost flow for one year period.