Reference no: EM132684104

Question - Mooresville Corporation manufactures reproductions of eighteenth-century, classical-style furniture. It uses a job costing system that applies factory overhead on the basis of direct labor hours. Budgeted factory overhead for the year was $1,426,000, and management budgeted 92,000 direct labor hours. Mooresville had no Materials, Work-in-Process, or Finished Goods Inventory at the beginning of August. These transactions were recorded during August:

1. Purchased 6,000 square feet of oak on account at $26 per square foot.

2. Purchased 150 gallons of glue on account at $36 per gallon (indirect material).

3. Requisitioned 4,200 square feet of oak and 41 gallons of glue for production.

4. Incurred and paid payroll costs of $208,900. Of this amount, $56,000 were indirect labor costs; direct labor personnel earned $22 per hour.

5. Paid factory utility bill, $16,930 in cash.

6. August's insurance cost for the manufacturing property and equipment was $4,000. The premium had been paid in March.

7. Incurred $9,150 depreciation on manufacturing equipment for August.

8. Recorded $2,650 depreciation on an administrative asset.

9. Paid advertising expenses in cash, $5,950.

10. Incurred and paid other factory overhead costs, $14,500.

11. Incurred and paid miscellaneous selling and administrative expenses, $14,000.

12. Applied factory overhead to production on the basis of direct labor hours.

13. Produced completed goods costing $151,000 during the month.

14. Sales on account in August were $137,000. The Cost of Goods Sold was $117,000.

Required -

1. Compute the firm's predetermined factory overhead rate for the year.

2. Prepare journal entries to record the August events.

3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Sold account on August 31.

4. Do a schedule of Cost of Goods Manufactured and Cost of Goods Sold.

5. Prepare the income statement for August.