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    Flow of Production Costs and Journal Entries

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    Edison Company - cost of goods manufactured and sold - 14 Nov, 2012

    Edison Company manufactures wool blankets and accounts for production costs using process costing. The following information is available regarding its May inventories.

    Beginning Inventory Ending Inventory

    Raw materials inventory $28,000 $25,500

    Goods in process inventory 220,750 252,000

    Finished goods inventory 319,000 277,000

    The following additional information describes the company's production activities for May.

    Raw material purchases (on credit) $135,000

    Factory payroll cost (paid in cash) 791,500

    Other overhead cost (Other accounts credited) 43,000

    Materials used

    Direct $93,500

    Indirect 31,000

    Labor used

    Direct 352,000

    Indirect 439,500

    Overhead rate as a percent of direct labor 110%

    Sales (on credit) 1,500,000

    Questions:

    I figured out that the cost of goods sold is $843,450 and I'm stuck on the rest of what it's asking me to do. Please help!

    1. Compute the cost of (a) products transferred from production to finished goods and (b) goods sold.

    2. Prepare summary journal entries dated May 31 to record the following production activities during May:

    a) raw materials purchase
    b) direct materials usage
    c) indirect materials usage
    d) payroll costs
    e) direct labor costs
    f) indirect labor costs
    g other overhead costs
    h) overhead applied
    i) goods transferred from production to finished goods
    j) sale of finished goods.

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    Solution Summary

    The flow of production costs and journal entries are provided.

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