Reference no: EM132639417

Problem Information: Jackson Co. began the year with the following balances in its inventory accounts:

Raw Materials $ 125,000

Work-in-Process $ 320,000

Finished Goods $ 400,000

Jackson Co. applies overhead to production using direct labor cost. As of the beginning of the year, Jackson Co. 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 $15,832 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 Jackson Co. 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: Compute the amount of over- or under-applied overhead for the year (be sure to label it as over or under applied).

Question 5: Assuming Jackson Co. closes under or over-applied overhead to Cost of Goods Sold, compute adjusted COGS for the period.

Question 6: Create traditional format income statement for the year (ignore income taxes).

Question 7:  Clarity of supporting computations.