Reference no: EM132857151

Question - The Big Ship Manufacturing Company manufactures custom made ships. The company utilizes a job order cost system based upon normal costs to cost each job. There are two direct cost categories (direct materials and direct manufacturing labor) and one indirect-cost pool (manufacturing overhead), which is allocated on the basis of direct labor costs. Budgeted overhead for the period totaled $2,160. Budgeted direct labor for the period was 500 hours of work totaling $1,350.

The following information is available as of the beginning of the current accounting period:

Inventories, December 31, 2013

Materials control 100

Work in process:

Job No. 2 35

Job No. 3 35

Finished goods control

Job No. 1 500

During the current period, the company work on four ships and completed three of them. The following information is available for 2014.

Direct materials and supplies purchased on account $800

Direct materials used

Job No. 2 $185

Job No. 3 210

Job No. 4 75

Job No. 5 240

Indirect materials issued to various production departments 100

Direct manufacturing labor

Job No. 2 300

Job No. 3 450

Job No. 4 110

Job No. 5 440

Indirect manufacturing labor incurred by various departments 900

Depreciation on building and manufacturing equipment 500

Miscellaneous manufacturing overhead incurred by various departments 550

Manufacturing overhead allocated ?

Cost of goods manufactured ?

Jobs 2, 3, and 5 were completed during the period

Revenues 4,020

Cost of goods sold ?

Jobs 1, 2 and 5 were sold during the period

Administrative expense 600

At year-end, the company disposes of any amounts of over- or under-applied overhead by writing off the amount to cost of goods sold account.

Required -

1. Calculate the predetermined overhead rate.

2. Prepare the journal entries for Big Ship to record the transactions for the period.

3. Post the information to t-accounts.

4. Show COGS, gross margin, and operating income (after adjustment).