Reference no: EM131196711
Problem:
Maverick Wings, Inc. manufactures airplanes for use in stunt shows. Maverick's factory is highly automated, using the latest in robotic technology. To keep costs low, the company employs as few factory workers as possible. Since each plane has different features (such as its shape, weight, and color), Maverick uses a job order costing system to accumulate product costs.
At the end of 2013, Maverick's accountants developed the following expectations for 2014 based on the marketing department's sales forecast:
Budgeted overhead cost |
|
$1,079,000 |
|
Estimated machine hours |
|
44,000 |
|
Estimated direct labor hours |
|
9,000 |
|
Estimated direct materials cost |
|
$1,520,000 |
Maverick's inventory count, completed on December 31, 2013, revealed the following ending inventory balances:
Raw Materials Inventory |
|
$250,000 |
|
Work in Process Inventory |
|
$625,000 |
|
Finished Goods Inventory |
|
$1,240,000 |
The company's 2014 payroll data revealed the following actual payroll costs for the year:
Job Title |
|
Number Employed |
|
Wage Rate per Hour |
|
Annual Salary per Employee |
|
Total Hours Worked per Employee |
|
President and CEO |
|
1 |
|
|
|
$228,000 |
|
|
|
Vice president and CFO |
|
1 |
|
|
|
$178,000 |
|
|
|
Factory manager |
|
1 |
|
|
|
$40,500 |
|
|
|
Assistant factory manager |
|
1 |
|
|
|
$30,600 |
|
|
|
Machine operator |
|
5 |
|
$14.50 |
|
|
|
2,250 |
|
Security guard, factory
|
|
2 |
|
|
|
$20,600 |
|
|
|
Materials handler |
|
2 |
|
$7.50 |
|
|
|
2,000 |
|
Corporate secretary |
|
1 |
|
|
|
$35,800 |
|
|
|
Janitor, factory |
|
2 |
|
$6 |
|
|
|
2,150 |
The following information was taken from Maverick's Schedule of Plant Assets. All assets are depreciated using the straight-line method.
Plant Asset |
|
Purchase Price |
|
Salvage Value |
|
Useful Life |
|
Factory building |
|
$4,000,000 |
|
$150,000 |
|
20 Years |
|
Administrative office |
|
$650,000 |
|
$125,000 |
|
30 Years |
|
Factory equipment |
|
$2,000,000 |
|
$20,000 |
|
12 Years |
Other miscellaneous costs for 2014 all paid in cash included:
Cost |
|
Amount |
|
Factory insurance |
|
$12,200 |
|
Administrative office utilities |
|
$5,800 |
|
Factory utilities |
|
$33,100 |
|
Office supplies |
|
$4,500 |
Additional information about Maverick's operations in 2014 includes the following:
• Raw materials purchases for the year amounted to $1,947,000. All purchases were on account.
• The company used $1,860,000 in raw materials during the year. Of that amount, 85% was direct materials and 15% was indirect materials.
• Maverick applied overhead to Work in Process Inventory based on direct materials cost.
• Airplanes costing $3,450,000 to manufacture were completed and transferred out of Work in Process Inventory.
• Maverick uses a markup of 80% to price its airplanes. Sales for the year were $6,570,000.
(Note: This transaction requires two journal entries.)
• All sales were on account.
What was Maverick's predetermined overhead rate in 2014? (Round answer to 2 decimal places, e.g. 2.45%.)
Prepare the journal entries to record Maverick's costs for 2014. (Use Salaries Payable and Wages Payable accounts for payroll costs.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Post entries in order presented in the problem. Round answers to 0 decimal places, e.g. 345,000.)
No. |
Account Titles and Explanation |
Debit |
Credit |
1. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record salaries for president, vice president, and corpoarte secretary) |
|
|
2. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record labor costs for factory manager, assistant factory manager, and two security gaurds) |
|
|
3. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record direct labor) |
|
|
4. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record depreciation on administrative office equipment) |
|
|
5. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record depreciation on factory building and equipment)
|
|
|
6. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record administrative office utilities and office supplies expense) |
|
|
7. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To reocrd factory insurance and factory utilities) |
|
|
8. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record raw materials purchases) |
|
|
9. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record direct materials and indrect materials used in production) |
|
|
10. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To apply overhead to work in process) |
|
|
11. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record transfer of completed airplanes) |
|
|
12. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record cost of airplanes sold) |
|
|
13. |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
![](https://edugen.wiley.com/edugen/art2/common/pixel.gif) |
|
(To record sale of airplanes to customers) |
|
Prepare the appropriate T-accounts for Raw Materials Inventory, Work-in-Process Inventory, Finished Goods Inventory, Manufacturing Overhead Control, Cost of Goods Sold, and Sales, and record Maverick's transactions for 2014. (Post entries in order presented in the problem. Round answers to 0 decimal places, e.g. 345,000.)
Was manufacturing under- or overapplied in 2014? By how much? (Round answer to 0 decimal places, e.g. 345,000.)
Make the adjusting entry necessary to close the under- or overapplied overhead to cost of goods sold. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 345,000.)
If Maverick chooses instead to prorate under- or overapplied overhead, what would the adjusted balances be in Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold for 2014? (Round answers to 0 decimal places, e.g. 345,000 and percentage of total to 2 decimal places e.g. 34.52).
Job 3827 was started and completed in 2014. The job required 700 machine hours, 300 direct labor hours, and $79,000 in direct materials to complete. What was the total cost of this job? Using Maverick's 80% markup, what sales price would be charged for this airplane? (Round answers to 0 decimal places, e.g. 345,000.)
If Maverick had chosen to use machine hours as its overhead application base, what would the rate have been in 2014? (Round answer to 2 decimal places, e.g. 2.45.)
Describe the company overall people-management strategy
: Evaluate the company's culture. (Which aspects do you find most appealing, and which concern you?) Analyze the company's ability to attract and retain employees. (What competitive advantages does the company have, and what are its greatest disadva..
|
How theoretical concepts influence managerial practices
: Examine and evaluate critically how these theoretical concepts influence managerial practices in your chosen organisation with reference to either Strategic Management or Sustainability.
|
Increase sufficiency in the delivery of public services
: Suggest three (3) strategies that a public leader could use in order to do the following: persuade other governmental departments to work collaboratively to reduce financial burdens, increase sufficiency in the delivery of public services, and implem..
|
Educational-environmental-health-ethics
: Ideas can also be marketed. Marketed ideas are commonly heard in Educational, Environmental, Health, Ethics, Religious, and Political arenas. List 5 ideas that you have seen (or heard) marketed, and then list some goods or services that come from,..
|
Prepare t accounts for raw materials inventory
: Prepare the appropriate T-accounts for Raw Materials Inventory, Work-in-Process Inventory, Finished Goods Inventory, Manufacturing Overhead Control, Cost of Goods Sold, and Sales, and record Maverick's transactions for 2014.
|
Abuse of monopoly-like economic power
: What was the basis of the U.S. government's finding against Microsoft (abuse of monopoly-like economic power)?
|
When matching type of innovation with supply-chain functions
: When matching the type of innovation with supply-chain functions, it is appropriate to match:
|
Opposed employer mandated national health insurance package
: Approximately 46 million Americans under age 65 are uninsured. About two-thirds of the uninsured are either employed (full- or part- time) or in a family with an employed member. Which groups favored and which groups opposed an employer mandated nati..
|
Discuss the theoretical communication model
: Briefly provide a context for your discussion regarding the importance of understanding communication in IMC and identify the organisation you have chosen and discuss the theoretical communication model outlined by Belch et al, (2014).
|