Question

Please answer the following question.

JOB ORDER COSTING The company "Homes for Us" manufactures houses. The company is labor intensive and allocates overhead based on labor hours. “Homes for Us" expects to incur $400,000 of manufacturing overhead costs and to use 8,000 labor hours during 2018. "Homes for Us" had no beginning inventory. It recorded the following transactions during January, 1. Purchased direct materials (on account) for $85,000 2. Purchased indirect materials (on account) for $12,000 3. Incurred other manufacturing overhead cost (on account) for $15,000 4. Used direct materials - $60,000 s. Incurred direct labor costs- $50,000 Used $4,000 of the indirect materials (that was purchased in #2) 7. Allocated manufacturing overhead for January The company actually used 400 machine hours in January. Requirements: 1] Calculate the Pre-determined Manufacturing Overhead Rate. 2] Record the Journal Entries for the purchase of materials & overhead (items #1, #2 & #3) Accounts Debit Credits Accounts/Debit (sy Credit(s) Accounts Debit (5) Credits

Answer 1

Estimated overhead costs Estimated labor hours Predetermined overhead rate per labor hour $400,000 8,000 $50 ($400000 / 8000 labor hours] Credit Remarks and Workings Items 1) Debit $85,000 $85,000 (To record raw materials (direct) purchased on account) General Journal Raw Materials Inventory Accounts Payable Raw Materials Inventory Accounts Payable Manufacturing overhead Accounts Payable $12,000 $12,000 (To record raw materials (indirect) purchased on account) $15,000 $15,000 |(To manufacturing overhead cost incurred) Items Credit Remarks and Workings A) Debit $60,000 General Journal Work in Process Inventory Raw Materials Inventory Work in Process Inventory Wages Payable $60,000 |(To record direct materials used in production) 5) $50,000 $50,000 |(To record direct labor costs incurred) 4) Items Credit Remarks and Workings 6) Debit $4,000 General Journal Manufacturing overhead Raw Materials Inventory Work in Process Inventory Manufacturing overhead $4,000 7) $20,000 (To record indirect materials used in production) [400 hours x $50] (To record mfg. overhead applied to the production) $20,000

5) Trans. # Credit General Journal Manufacturing Overhead Cost of Goods Sold Debit $1,000 h) Remarks and Workings [Ref: Workings below] (To close the allocated balance of the overhead account) $1,000 Workings for under-or over-applied manufacturing overhead: Actual manufacturing overhead costs incurred $19,000 ($15000 + $4000] Factory overhead applied $20,000 [Ref: Entry # 7 in Part-4] Over-applied factory overhead cost in April $1,000 $19000 - $20000] (It is over-applied because applied MOH is more than Actual MOH incurred)