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Sierra Company manufactures soccer balls in two sequential processes: Cutting and Stitching. All direct materials enter production at the beginning of the cutting process. The following information is available regarding its May inventories:
Beginning Inventory
Ending Inventory
Raw materials inventory
$ 6,000
$ 9,250
Work in process inventoryCutting
43,500
51,500
Work in process inventoryStitching
63,300
60,500
Finished goods inventory
20,100
8,250
The following additional information describes the company's production activities for May.
Direct materials
Raw materials purchased on credit
$ 25,000
Direct materials usedCutting
21,750
Direct materials usedStitching
0
Direct labor
Direct laborCutting
$ 15,600
Direct laborStitching
62,400
Factory Overhead (Actual costs)
Indirect materials used
$ 6,000
Indirect labor used
55,000
Other overhead costs
46,505
Factory Overhead Rates
Cutting
150% of direct materials used
Stitching
120% of direct labor used
Sales
$ 256,000
Required:
1.Compute the amount of (a) production costs transferred from Cutting to Stitching, (b) production costs transferred from Stitching to finished goods, and (c) cost of goods sold. Hint: Compute the total production costs in each department and then subtract the ending inventory to get the amount transferred out of each department.
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