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 a. Raw materials purchased on account, $200,000 b. Raw materials used in production (all direct materials). $185,000. c. Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities). d. Accrued salary and wage costs: Direct labor (975 hours) Indirect labor Selling and administrative salaries $ 230.000 $ 90,000 $ 110,000 e. Maintenance costs incurred on account in the factory, $54,000. f. Advertising costs incurred on account. $136.000. g. Depreciation was recorded for the year. $95.000 (80% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on account, $120,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).

Answer 1

Answer-Predetermined overhead rate =$360,000 / 900 direct labor-hours= $400

No	Account Titles and Explanation	Debit	Credit
a	Raw Material Inventory	200,000
	Accounts Payable		200,000
b	Work in Process Inventory	185,000
	Raw Material Inventory		185,000
c	Manufacturing Overhead	63,000
	Utility Expenses ($70,000*10%)	7,000
	Accounts Payable		70,000
d	Work in Process Inventory	230000
	Manufacturing Overhead	90,000
	Salaries Expenses	110,000
	Wages Payable		430,000
e	Manufacturing Overhead	54,000
	Accounts Payable		54,000
f	Advertisement Expenses	136,000
	Accounts Payable		136,000
g	Manufacturing Overhead	76,000
	Depreciation Expenses	19,000
	Accumulated Depreciation		95,000
h)	Manufacturing Overhead	102,000
	Rent Expenses	18,000
	Accounts Payable		120,000
i	Work in Process Inventory ($400*975 hrs)	390,000
	Manufacturing Overhead		390,000
J	Finished Good Inventory	770,000
	Work in Process Inventory		770,000
k	Accounts Receivable	1,200,000
	Sale		1,200,000
	(To record the sale )
	Cost of Good Sold	800,000
	Finished Good Inventory		800,000
	(To record the cost of the sale)