Question

Problem 4-46 Cost Flows; Application of Overhead [LO 4-3, 4-4, 4-5] 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 $1,261,500, and management budgeted 87,000 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: a. Purchased 5,000 square feet of oak on account at $26 per square foot. b. Purchased 50 gallons of glue on account at $36 per gallon (indirect material). c. Requisitioned 3,500 square feet of oak and 31 gallons of glue for production. d. Incurred and paid payroll costs of $187,900. Of this amount, $46,000 were indirect labor costs, direct labor personnel earned $22 per hour. e. Paid factory utility bill, $15,230 in cash. f. August's insurance cost for the manufacturing property and equipment was $3,500. The premium had been paid in March. g. Incurred $8,500 depreciation on manufacturing equipment for August. h. Recorded $2,400 depreciation on an administrative asset. i. Paid advertising expenses in cash, $5,500. j. Incurred and paid other factory overhead costs, $13,500. k. Incurred and paid miscellaneous selling and administrative expenses, $13,250. 1. Applied factory overhead to production on the basis of direct labor hours. m. Produced completed goods costing $146,000 during the month. n. Sales on account in August were $132,000. The Cost of Goods Sold was $112.000.

Answer 1

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Solution : predetermined overhead 1261 500 87000 Yote $14.50 per direct labor hour Jornal entries : a Direct $130000 130 000 Materials inventory Alc or To Accounts payable ($ 26*5000 = $ 130000] $1800 be Materials TO Inventory Alc ir Accounts payable [136750 = $1800] & 1800 91000 § 16 & 21ooo $1116 Worlk-in process inventory Alcor factory overhead Atc ist To Materials inventory To Materials inventory [ $2643500-$91000] [$ 36x31 - $1410] d. $ 187900 Work-in-process inventory Al Dr $441900 Factory overhead Alc or & 46000 To cash [$ 187900-$46000 = $141900] Direct labor hour osed = $ 141900 $22 6450 hours $ 15230 Factory overhead Ale or To cash & 15230

f. Factory overhead To prepaid ale Dr insurance +3560 3100 Factory overhead Alc To A comulated or Depreciation $ 8500 $8500 selling $ 2400 ý Admin Expense Alc or To accomolated Depreciation $ 2400 & 5500 (13500 Advertising expense All or & 5500 To cash factory overhead Alc or $13500 So cash selling § Admin expense Alc Dr $13260 To cast Appled overhead = $1495086450 DL Hours = $93525 $13250 993525 * work-in-process inventory Alcor To factory overhead $93525 $ 146000 $146000 m Finished Goods To Work . inventory Alc or in process inventory $146000 Accounts $ 132000 or Receivable Alc Sales Revenue $132000 so $ 112000 Cost of Goods sold Alo DV Finished goods inventory $112000 To » Actual overhead & 1 16t $46000 & $ 15230 +$3500+ $8500 + $ 13500 = 887846 overhead overopplied as 93525-$87846 = $5679

Amount Explanation $ 8500 $39000 -130 000 -91000 130000 $ 1116 $ 141900 $ 46000 Dota Depreciation expense -plant Materials inventory beginning Direct Materials, Ending Direct Materials porchases Indirect materials used Direct labor a wages Indirect labor- wages Finished goods inventory beginning Finished goods inventory, ending factory stilities Factory insurance Selling y Admin work-in-process inventory, ending Advertising expense Sales Revenue other factory overhead 146000-112000 $ 34000 $15230 $ 3500 $ 15650 $180425 $ 5500 $ 132000 $ 13500 = 2400€ 13250 91000 of 141900499525 -146000

Mooresville corporation Statement of cost of goods manufactured for the month ended August 31 particolars Amount + Amount Dirat Materials used - Materials inventory, beginning $0 - Direct Materials porchases + $130000 Total Direct Materials available $ 130000 - Direct Materials inventory, ending - $ 39000 Direct Materials used Direct labor -wages. Factory overhead Applied Total Mfg costs incorred during the year Work in process inventory , Beginning poral mfg costs to Account for world-in -process inventory, ending cost of Goods manufactured $ 91000 $ 141900 $93525 $326425 + $0 $326425 - $180425 $146000 $416 f15230 $3500 8500 Actual overhead : - Indirect Materials used - Factory ukitties - Factory insurance - Depreciation expense-plans - Other factory overhead - Endirect labor - wages Total factory overhead Total Applied overhead over appted' Overhead → 8 13500 46000 $87846 $ 93025 $5679

Mooresville corporation Income Statement for the month Ended August 31 Amount Amoont € 132000 particolars Sales Revenue cost of goods sold: .finished goods inventory beginning - cost of goods manufactured Total goods Avoclable for sale - finished goods inventory, ending cost of goods Sold over appled overhead Adjusted cost of goods manofactored Gross margin (A) - Advertising expense - selling is Admin ($2400+ $13200) Total selling up Admin expenses (B) : Operating Income (A-B) $0 $ 146000 $146000 $ 34000 $ 112000 - $ 5679 $106321 & 25679 $5500 $ 15650 2 USD 4529