Question

The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 8,000 batteries at a cost of $80 per battery. It withdrew 7,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the company’s traveling sales staff. The remaining 7,500 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90 percent were completed and transferred from work in process to finished goods. Of the cars completed during the month, 30 percent were unsold at April 30th.

Required:
Determine the cost of batteries that would appear in each of the following accounts on April 30th.

Name of the Account Cost
a. Raw Materials
b. Work in Process
c. Finished Goods
d. Cost of Goods Sold
e. Selling Expense

Answer 1

Answer and Explanation:

The computation is shown below:-

a) raw-materials is

= (8,000 - 7,600) × $80

= $32,000

b) work in process 7,500 batteries x $80 x 10%

= $60,000

c) Finished goods = 7,500 batteries × $80 × 90% × 30%

= $162,000

d) cost of goods sold 7,500 batteries x $80 × 90% × 70%

= $378,000

e) selling expense is

= 100 × $80

= $8,000

Total 8,000 batteries purchased × $10 per battery is

$80,000

2. Specification is shown below:

a) rawmaterials  stock               $32,000  Balance Sheet

b) work inprocess                     $60,000   BalanceSheet  

c) Finishedgoods stock            $162,000   BalanceSheet

d) cost of goodssold                 $378,000   IncomeStatement

e) sellingexpense                     $8,000   IncomeStatement

Answer 2

As  the Devon motor company.

• a) raw-materials is

= (8,000 - 7,600) × $80

= $32,000

• b) work in process 7,500 batteries x $80 x 10%

= $60,000

• c) Finished goods = 7,500 batteries × $80 × 90% × 30%

= $162,000

• d) cost of goods sold 7,500 batteries x $80 × 90% × 70%

= $378,000

• e) selling expense is

 100 × $80

= $8,000.

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