The Bags and Luggage Company had the following account balances as of January 1:
Direct Materials Inventory $ 8,700
Work in Process Inventory 76,500
Finished Goods Inventory 53,000
Manufacturing Overhead - 0 -
During the month of January, all of the following occurred:
1. Direct labor costs were $49,000 for 1,800 hours worked.
2. Direct materials costing $28,000 and indirect materials costing $5,000 were purchased.
3. Sales commissions of $15,000 were earned by the sales force.
4. $22,000 worth of direct materials were used in production.
5. Advertising costs of $6,300 were incurred.
6. Factory supervisors earned salaries of $12,046.
7. Indirect labor costs for the month were $3,000.
8. Monthly depreciation on factory equipment was $4,500.
9. Utilities expense of $7,061 was incurred in the factory.
10. Luggage with manufacturing costs of $69,000 were transferred to finished goods.
11. Monthly insurance costs for the factory were $4,200.
12. $5,000 in property taxes on the factory were incurred and paid.
13. Luggage with manufacturing costs of $96,743 were sold for $175,897.
a.
Assume If Bags and Luggage assigns manufacturing overhead of $34,400, what will be the balances in the Direct Materials, Work in Process, and Finished Goods Inventory accounts at the end of January?
Direct materials inventory $
Work in process inventory $
Finished goods inventory $
b.
As of January 31, what will be the balance in the Manufacturing Overhead account?
c.
What was Bags and Luggage's operating income for January?
no one gonna help you
To answer these questions, let's keep track of all the transactions that occurred during the month of January.
a. To determine the balances in the Direct Materials, Work in Process, and Finished Goods Inventory accounts at the end of January, we need to consider the following transactions:
1. Direct materials purchased: $28,000
2. Direct materials used in production: $22,000
3. Direct labor costs: $49,000
4. Manufacturing overhead assigned: $34,400
5. Luggage transferred to finished goods: $69,000
First, we calculate the ending balances for each account:
Direct Materials Inventory = Beginning Balance + Purchases - Usage
Direct Materials Inventory = $8,700 + $28,000 - $22,000
Direct Materials Inventory = $14,700
Work in Process Inventory = Beginning Balance + Direct Labor + Manufacturing Overhead
Work in Process Inventory = $76,500 + $49,000 + $34,400
Work in Process Inventory = $159,900
Finished Goods Inventory = Beginning Balance + Transfers
Finished Goods Inventory = $53,000 + $69,000
Finished Goods Inventory = $122,000
Therefore, the balances in the Direct Materials, Work in Process, and Finished Goods Inventory accounts at the end of January are as follows:
Direct materials inventory: $14,700
Work in process inventory: $159,900
Finished goods inventory: $122,000
b. To determine the balance in the Manufacturing Overhead account as of January 31, we need to consider the manufacturing overhead assigned and the expenses incurred:
Manufacturing Overhead = Manufacturing Overhead Assigned - Expenses
Manufacturing Overhead = $34,400 - ($12,046 + $3,000 + $4,500 + $7,061 + $4,200 + $5,000)
Manufacturing Overhead = $34,400 - $35,807
Manufacturing Overhead = -$1,407
Therefore, the balance in the Manufacturing Overhead account as of January 31 is -$1,407.
c. To calculate Bags and Luggage's operating income for January, we need to consider the sales revenues, the sales commissions earned, and the manufacturing costs of the goods sold:
Operating Income = Sales Revenues - Cost of Goods Sold - Sales Commissions
Operating Income = $175,897 - ($69,000 + $96,743) - $15,000
Operating Income = $175,897 - $165,743 - $15,000
Operating Income = $-4,846
Therefore, Bags and Luggage's operating income for January is -$4,846.
a. To determine the balances in the Direct Materials, Work in Process, and Finished Goods Inventory accounts at the end of January, we need to calculate the changes in each account based on the information provided.
- Direct Materials Inventory:
Starting balance: $8,700
Purchases of direct materials: $28,000
Direct materials used in production: $22,000
Ending balance = Starting balance + Purchases - Direct materials used
Ending balance = $8,700 + $28,000 - $22,000
Ending balance = $14,700
Therefore, the balance in the Direct Materials Inventory account at the end of January is $14,700.
- Work in Process Inventory:
Starting balance: $76,500
Direct labor costs: $49,000
Manufacturing overhead assigned: $34,400
Luggage transferred to finished goods: $69,000
Ending balance = Starting balance + Direct labor costs + Manufacturing overhead assigned - Luggage transferred to finished goods
Ending balance = $76,500 + $49,000 + $34,400 - $69,000
Ending balance = $90,900
Therefore, the balance in the Work in Process Inventory account at the end of January is $90,900.
- Finished Goods Inventory:
Starting balance: $53,000
Luggage transferred to finished goods: $69,000
Luggage sold: $96,743
Ending balance = Starting balance + Luggage transferred to finished goods - Luggage sold
Ending balance = $53,000 + $69,000 - $96,743
Ending balance = $25,257 (negative balance indicates a decrease in inventory)
Therefore, the balance in the Finished Goods Inventory account at the end of January is -$25,257.
b. The balance in the Manufacturing Overhead account at the end of January can be calculated by summing up all the manufacturing overhead costs incurred during the month:
Manufacturing Overhead = Monthly depreciation + Utilities expense + Insurance costs + Property taxes
Manufacturing Overhead = $4,500 + $7,061 + $4,200 + $5,000
Manufacturing Overhead = $20,761
Therefore, the balance in the Manufacturing Overhead account at the end of January is $20,761.
c. To calculate Bags and Luggage's operating income for January, we need to consider the revenue from sales and the expenses incurred during the month:
Operating Income = Revenue - Expenses
- Revenue: Luggage sold for $175,897
- Expenses: Direct labor costs + Direct materials used + Manufacturing overhead assigned + Sales commissions + Advertising costs + Factory supervisors' salaries + Indirect labor costs
Expenses = $49,000 + $22,000 + $34,400 + $15,000 + $6,300 + $12,046 + $3,000
Expenses = $141,746
Operating Income = $175,897 - $141,746
Operating Income = $34,151
Therefore, Bags and Luggage's operating income for January is $34,151.