Reference no: EM132577563
Aouad Inc., which uses a job-order costing system, had two jobs in process at the start of 2017: job number 64 ($84,000) and job number 65 ($53,500). The following information is available:
a) The firm applies manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year were anticipated to be $840,000 and 16,000 hours, respectively.
b) The firm worked on four jobs during the first quarter. Direct materials used, direct labor incurred, and machine hours consumed were as follows:
Job No. Direct Material Direct Labor Machine Hours
64 $21,000 $35,000 1,200
65 - 22,000 700
66 44,000 65,000 2,000
67 15,000 8,800 500
c) Manufacturing overhead during the first quarter of 2017 includes charges for depreciation ($34,000), indirect labor ($60,000), indirect materials used ($5,000), and other factory costs ($139,500).
d) Aouad Inc. completed job number 64 and job number 65. Job 65 was sold on account producing a profit of $34,700 for the firm.
Instructions:
Question 1) Determine the firm's predetermined overhead application rate.
Question 2) Prepare journal entries as of March 31 to record the following. (Note: use summary entries where appropriate by combining individual job data.)
i. The issuance of direct material to production and the direct labor incurred.
ii. The manufacturing overhead incurred during the quarter.
iii. The application of manufacturing overhead to production.
iv. The completion of jobs 64 and 65.
v. The sale of job 65.
Question 3) Determine the cost of the jobs still in production as of March 31.
Question 4) Did the finished-goods inventory account increase or decrease during the first quarter? By how much?
Question 5) Was manufacturing overhead under- or overapplied for the first quarter of the year. By how much?
Question 6) Prepare the necessary adjusting entry(s) to close the gap in the manufacturing overhead account into cost of goods sold.