Manufacturing Process Information

Slam, Dunk, Score, Inc. started a small manufacturing plant that manufactures mini sport balls with logos printed on them. The manufacturing process starts by pouring the plastic pellets into molds, melting and forming the balls and then printing the logo onto the balls after they are formed. The printing of the logo will be the last step in the production process. The resulting balls are then sent to quality control and if the inspection is approved, they are transferred to finished goods. This process is completely automated.

Direct material, Plastic Pellets, is added $100\backslash \%$ at the beginning of the process.

Direct material ink, for the logo$,$ is added $100\backslash \%$ at the end of the process.

Conversion costs are added equally throughout the process. Conversion is $\backslash (40\backslash \%\backslash )$ complete for the beginning inventory work in process and $60\backslash \%$ complete for the ending inventory work in process.

At the beginning of the accounting period, Slam, Dunk, Score, Inc. started $150,000$ units. The predetermined factory overhead rate is based on an estimated FOH cost of $\backslash (\backslash$$ $7,500\backslash ).$ Overhead is applied to production based on direct labor hours. This information is to be used to determine the application rate for overhead.

Estimated and actual direct labor costs totaled $\backslash (\backslash$$ $7,300\backslash )$ which is calculated at $\backslash (\backslash$$ $7\mathrm{.}30\backslash )$ per hour.

Actual factory overhead costs totaled $\backslash$$$1,050,000.$

Beginning Work$-$in$-$Process costs totaled $\backslash (\backslash$$ $0\backslash )$ since this is the first month of production.

The following information is available concerning direct materials.

Direct Materials$-$Plastic

Beginning inventory

Purchase of Plastic Pellets

Ending Inventory

One pound of plastic makes $100$ balls

$0$ plastic pellets @ $\backslash$$$11\mathrm{.}00$ per pound

$1,700$ pounds @ $\backslash$$$11\mathrm{.}00$ per pound

$200$ pounds @ $\backslash$$$11\mathrm{.}00$ per pound

Direct Material$-$Ink

Beginning inventory

Purchases of Ink

Ending inventory

One cartridge will print $100$ balls

$0$ ink cartridges @ $\backslash$$$20\mathrm{.}00$ per cartridge

$1,700$ cartridges @ $\backslash$$$20\mathrm{.}00$ per cartridge

$300$ cartridges @ $\backslash$$$20\mathrm{.}00$ per cartridge

The Work$-$in$-$Process account has the following information

Beginning Work$-$in$-$Process contains $0$ equivalent units

Ending Work$-$in$-$Process contains $10,000$ equivalent units The Finished Goods account has the following Information

Beginning Finished Goods contains $0$ balls

Ending Finished Goods contains $1,000$ balls

The selling price is $\backslash (\backslash$$ $10\backslash )$ per ball and $139,000$ balls were sold

Selling and Administrative Costs totaled $\backslash (\backslash$mathbf$\{\backslash$$ $70,000\}\backslash )$; tax rate is $\backslash (\backslash$mathbf$\{30\backslash \%\}\backslash )$ Steps for Part $2$

Step $(1)$ Determine the predetermined OH rate

Step $(2)$ Determine the total number of balls to account for $-$ see example on page $8$

Step $(3)$ Determine the Equivalent Units Schedule $-$ see example on page $8$

Step $(4)$ Determine the total costs for the plastic pellets and the unit plastic pellet cost per ball.

Step $(5)$ Determine the total costs for the ink and the unit ink cost per ball.

Step $(6)$ Determine the total conversion cost and the conversion cost per ball using the predetermined rate.

Step $(7)$ Determine the total equivalent cost per ball $($plastic pellet cost per unit, plus the ink cost per ball, plus, the conversion cost per ball

Step $(8)$ Prepare a Cost of Production Report $-($Turn the equivalent unit schedule into dollars$)$ See provided example on page $16.$ Use FIFO costing

Step $(9)$ Ending WIP in Units and Dollars

Step $(10)$ Ending Finished Goods Inventory in Units and Dollars

Step $(11)$ COGS calculation

Step $(12)$ Over$/$Under Applied FOH

Step $(13)$ Income Statement showing Gross Margin, Income before taxes, Tax Amount and Net Income

Step $(11)$ Prepare the necessary Journal Entries related to the manufacturing cycle for this accounting period. Use the Chart of Account numbers for the journal entries.

a$.$ In the first journal entry record the purchase of Plastic Pellets and Ink using cash using one journal entry.

b$.$ Record the materials, plastic pellets and ink, transferred to WIP. Again, use one journal entry to record the transfer of the plastic pellets and the ink to WIP.

c$.$ Record the direct labor in WIP using Wages Payable.

d$.$ Record the applied FOH $.$

e$.$ Record the actual FOH using cash.

f$.$ Record the over or under applied FOH. g$.$ Record the sale of the goods on account along with the cost of the inventory that was sold. Record the sale first, then the COGS entry.