Reference no: EM132638326
Problem Information:Morrison Company began the year with the following balances in its inventory accounts:
Raw Materials $ 125,000
Work-in-Process $ 320,000
Finished Goods $ 400,000
Morrison applies overhead to production using direct labor cost. As of the beginning of the year, Morrison estimated total manufacturing overhead for the year to be $300,000 and total direct labor cost to be $600,000.
The following transactions occurred during the year:
1. Purchased $100,000 of raw materials on account.
2. Used $86,130 raw materials in production. Of the materials used, 80% were classified as direct and 20% as indirect.
3. Incurred and paid wages and salaries of $600,000. The wages were classified as:
Direct labor $525,000
Indirect labor $ 75,000
Selling and administration $ 230,000
4. Incurred the following additional costs:
Miscellaneous manufacturing overhead costs (this amount does not include costs of indirect materials, indirect labor and depreciation) $ 85,000
Selling and Administrative costs $230,000
5. Recorded total depreciation of $120,000, related to:
Factory manufacturing equipment $75,000
Equipment used for selling and administrative purposes $45,000
6. Work in process totaling $800,000 was transferred to Finished Goods during the year.
7. During the year, finished goods costing $1,000,000 were sold for $1,500,000.
REQUIRED Round all answers to the nearest dollar.
Question 1: Compute the predetermined overhead rate Morrison will use to apply MOH to Work-in-Process.
Question 2: Compute the amount of overhead applied to Work-in-Process during the year.
Question 3: Compute the ending balances in Raw Materials, Work-in-Process, and Finished Goods accounts (hint: don't forget to include beginning balances).
Question 4: Assuming Morrison closes under or over-applied overhead to Cost of Goods Sold, compute adjusted COGS for the period.
Question 5: Create a traditional format income statement for the year (ignore income taxes).
Question 6: Clarity of supporting computations.