Kam Motor Company manufactures automobiles. During September 2007 the company purchased 5,000 head lamps at a cost of $9 per lamp. Kam withdrew 4,650 lamps from the warehouse during the month. Fifty of these lamps were used to replace the head lamps in autos used by traveling sales staff. The remaining 4,600 lamps were put in autos manufactured during the month.
Of the autos put into production during September 2007, 90% were completed and transferred to the company's storage lot. Of the cars completed during the month, 75% were sold by September 30.
Determine the cost of head lamps that would appear in each of the following accounts at September 30, 2007:
Work in Process account, Finished Goods account, Cost of Goods Sold account, Selling Expenses account
Well, it seems like Kam Motor Company had quite the lamp extravaganza in September 2007! Let's break it down and calculate the costs for each account:
1. Work in Process Account:
Out of the 4,600 lamps put into autos manufactured during the month, 90% were completed and transferred to the storage lot. So, 4,600 * 0.9 = 4,140 lamps were completed and transferred. Since all of these lamps were used in the manufacturing process, the cost of these lamps would be included in the Work in Process account. So, the cost would be 4,140 * $9 = $37,260.
2. Finished Goods Account:
Out of the completed autos, 75% were sold. So, 4,140 * 0.75 = 3,105 lamps were sold and should be accounted for in the Finished Goods account. Hence, the cost would be 3,105 * $9 = $27,945.
3. Cost of Goods Sold Account:
The Cost of Goods Sold account represents the cost of the lamps that were sold. Since we know that 75% of the completed autos were sold, we can use this information to calculate the cost. So, 3,105 * $9 = $27,945 would be the cost of goods sold.
4. Selling Expenses Account:
Fifty lamps were used to replace the head lamps in autos used by traveling sales staff. The cost of these lamps would be considered as a selling expense. So, 50 * $9 = $450 would be the cost of selling expenses.
So, to summarize:
- Work in Process account: $37,260
- Finished Goods account: $27,945
- Cost of Goods Sold account: $27,945
- Selling Expenses account: $450
I hope these calculations illuminated your day a bit! If you have any more questions, feel free to ask!
To determine the cost of head lamps in each of the given accounts, we need to follow the flow of goods and transactions.
1. Work-in-Process (WIP) Account:
The WIP account represents the cost of goods that are still in the production process. In this case, 4,600 head lamps were put into autos manufactured during September 2007. Since these head lamps are still part of the manufacturing process, their cost would be included in the WIP account.
Cost of head lamps in the WIP account = Number of head lamps put into autos * Cost per lamp
= 4,600 lamps * $9 per lamp
= $41,400
Therefore, the cost of head lamps in the WIP account at September 30, 2007, would be $41,400.
2. Finished Goods Account:
The Finished Goods account represents the cost of goods that have been completed but not yet sold. In this case, 90% of the autos completed during September 2007 were transferred to the company's storage lot.
Cost of head lamps in the Finished Goods account = Number of autos completed and transferred * (Cost per lamp - Cost of lamps used for replacement)
= 90% of autos completed * (4,600 lamps * $9 per lamp - 50 lamps * $9 per lamp)
= 0.90 * (4,600 lamps * $9 per lamp - 50 lamps * $9 per lamp)
= 0.90 * (4,550 lamps * $9 per lamp)
= 0.90 * ($40,950)
= $36,855
Therefore, the cost of head lamps in the Finished Goods account at September 30, 2007, would be $36,855.
3. Cost of Goods Sold (COGS) Account:
The COGS account represents the cost of goods that have been sold during a given period. In this case, 75% of the autos completed during September 2007 were sold by September 30.
Cost of head lamps in the COGS account = Number of autos sold * (Cost per lamp - Cost of lamps used for replacement)
= 75% of autos completed * (4,600 lamps * $9 per lamp - 50 lamps * $9 per lamp)
= 0.75 * (4,600 lamps * $9 per lamp - 50 lamps * $9 per lamp)
= 0.75 * (4,550 lamps * $9 per lamp)
= 0.75 * ($40,950)
= $30,712.50
Therefore, the cost of head lamps in the COGS account at September 30, 2007, would be $30,712.50.
4. Selling Expenses Account:
The Selling Expenses account represents the costs incurred in the process of selling goods. However, in the given information, there are no specific details provided regarding any specific cost related to selling expenses for head lamps. Therefore, we cannot determine the cost of head lamps in the Selling Expenses account based on the given information.
In summary:
- Cost of head lamps in the Work-in-Process account: $41,400
- Cost of head lamps in the Finished Goods account: $36,855
- Cost of head lamps in the Cost of Goods Sold account: $30,712.50
- Cost of head lamps in the Selling Expenses account: N/A (Insufficient information provided)