Reference no: EM132543050

The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $94,500 of manufacturing overhead for an estimated activity level of $45,000 direct labor dollars.

At the beginning of the year, the inventory balances were as follows:

Raw materials$10,600

Work in process$4,100

Finished goods$8,200

During the year, the following transactions were completed:

Raw materials purchased on account, $ 169,000.
Raw materials used in production, $147,000 (materials costing $123,000 were charged directly to jobs; the remaining materials were indirect).

Costs for employee services were incurred as follows:

1. Direct labor$174,000
2. Indirect labor$284,000
3. Sales commissions$29,000
4. Administrative salaries$41,000
5. Rent for the year was $18,000 ($13,100 of this amount related to factory operations, and the remainder related to selling and administrative activities).
6. Utility costs incurred in the factory, $14,000.
7. Advertising costs incurred, $14,000.
8. Depreciation recorded on equipment, $24,000. ($16,000 of this amount related to equipment used in factory operations; the remaining $8,000 related to equipment used in selling and administrative activities.)
9. Record the manufacturing overhead cost applied to jobs.
10. Goods that had cost $229,000 to manufacture according to their job cost sheets were completed.
11. Sales for the year (all paid in cash) totaled $515,000. The total cost to manufacture these goods according to their job cost sheets was $215,000

Question 1: Make Record journal entries for the following transactions:-

1. Raw materials purchased on account, $169,000.

2. Raw materials used in production, $147,000 (materials costing $123,000 were charged directly to jobs; the remaining materials were indirect).

3. Cost for employee services incurred as follows: Direct labor $174,000 Indirect labor $284,000 Sales commissions $29,000 Administrative salaries $41,000

4. Rent for during the year was $18,000 ($13,100 of this amount related to factory operations, and the remainder related to selling and administrative activities).

5. Utility cost incurred in the factory, $14,000.

6. Advertising cost incurred, $14,000.

7. Depreciation recorded on equipment, $24,000. ($ 16,000 of this amount related to equipment used in factory operations; the remaining $ 8,000 related to equipment used in selling and administrative activities.)

8. Record the manufacturing overhead cost applied to jobs.

9. Goods that had cost $229,000 to manufacture according to their job cost sheets were completed.

10. Sales for the year (all paid in cash) totaled $515,000.

11. The total cost to manufacture these goods according to their job cost sheets was $215,000.

Question 2: Prepare T-accounts for each inventory account (Raw Materials, Work In Process and Finished Goods),Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don't forget to enter the beginning balances in your inventory accounts).

Question 3: (i). Is Manufacturing Overhead underapplied or overapplied for the year?

Question 3: (ii). Write a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

Question 4: Write an income statement for the year. All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.