Reference no: EM132637720
Question - Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year:
-Raw materials purchased on account, $200,000.
-Raw materials used in production (all direct materials), $185,000.
-Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
-Accrued salary and wage costs:
Direct labor (975 hours) $230,000
Indirect labor $90,000
Selling and administrative salaries $110,000
-Maintenance costs incurred on account in the factory, $54,000.
-Advertising costs incurred on account, $136,000.
-Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
-Rental cost incurred on account, $120,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).
-Manufacturing overhead cost was applied to jobs, $?
-Cost of goods manufactured for the year, $770,000.
-Sales for the year (all on account) totaled $1,200,000. These goods cost $800,000 according to their job cost sheets.
The balances in the inventory accounts at the beginning of the year were:
Raw Materials $30,000
Work in Process $21,000
Finished Goods $60,000
Required -
1. Prepare journal entries to record the preceding transactions.
2. Post your entries to T-accounts. (Don't forget to enter the beginning inventory balances above.)
3. Make a schedule of cost of goods manufactured.
4A. Make a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4B. Make a schedule of cost of goods sold.
5. Make an income statement for the year.