Question

PART 1 (25 marks) G-Force Woodcraft manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labour intensive production process, so it assigns manufacturing overhead based on direct labour cost. G-Force expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2016. At the end of December 2018, G-Force reported work in process inventory (Job 551) of $93,000 The following events occurred during January 2019. i) Purchased materials on account, $392,000 ii) incurred manufacturing wages of $400,000 iii) Requisitioned direct materials and used direct labour in manufacturing Direct Materials Direct Labour Job 551 $70,200 $61,200 Job 552 97,500 115,600 Job 553 105,300 78,200 Job 554 117,000 85,000 iv) Issued indirect materials to production, $30,000 v) Charged indirect manufacturing wages to production, $60,000 vi) Other manufacturing overhead costs incurred on units 551 to 554 amounted to $134,000 vii) Allocated overheads to jobs at the predetermined rate viii) Units completed: 551, 552 & 554 ix) Sold units 551 & 554 (billed customers at a margin of 33%% on sales) Required: (a) Compute G-Force's predetermined manufacturing overhead rate for 2019 (1% marks) (b) Calculate the total manufacturing costs for each job. (4 marks) (c) Using the total figures, record the above transactions in the general journal. (10 marks) (d) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account, clearly showing the balance before closing the account. State the journal entries necessary to dispose of the variance. Assume that the manufacturing overhead variance is immaterial. (4 marks) (e) What is the balance in the Cost of Goods Sold account after the adjustment? (2 marks) Compute G-Forcer's gross profit earned on the jobs, after adjusting for the manufacturing overhead variance (1% marks) Post the appropriate entries to Work in Process Inventory account & determine the account balance on January 31. (2 marks)

Answer 1

	ans 1 Predetermined Manufacturing overhead rate
	2205000/3150000	0.70
	ans 2
	Total manufacturing cost
	`	Job 551	Job 552	Job 553	Job 554	Total
	Opening balance	$93,000				93000
	Direct Material	70200	97500	105300	117000	390000
	Direct labor D	61200	115600	78200	85000	340000
	Manufacturning overhead D*.7	42840	80920	54740	59500	238000
	Total manufacturing cost	$267,240	$294,020	$238,240	$261,500	1061000
	Status	COGS	FG	WIP	COGS
	ans 3
	Accounts Title	Dr	Cr
i)	Raw Material Inventory	$392,000
	Accounts payable		$392,000
ii)	Factory labor	$392,000
	Wages payable		$392,000
iii)	Work In process Inventory	$390,000
	Raw Material Inventory		$390,000
	Work In process Inventory	$340,000
	Factory labor		$340,000
iv)	Manufacturing overhead	$30,000
	Raw Material Inventory		$30,000
v)	Manufacturing overhead	$60,000
	Factry labor		$60,000
vi)	Manufacturing overhead	$134,000
	Other payables		$134,000
vii)	Work In process Inventory	$238,000
	Manufacturing overhead		$238,000
viii)	Finished Goods Inventory	$822,760
	Work In process Inventory		$822,760
ix)	Finished Goods Inventory	$793,000
	Work In process Inventory		$793,000
	x-.3333x=528740
	528740/.6667	793000
	Cost of good sold	$528,740
	Finished Goods Inventory		$528,740
	ans d	Manufacturing overhead
	iv)	30000	WIP	238000
	v)	60000
	vi)	134000
			end bal	14000
	Accounts Title	Dr	Cr
	Manuacturing overhead	14000
	Cost of good sold		14000
	(being manufacturing overhead overapplied closed)
	ans e
	Balance in Cost of good sold	$514,740
	(267240+261500-14000)
	ans g
		Work In process
	Beg bal	93000	viii)	$822,760
	iv)	390000
	v)	340000
	vi)	238000
	end bal	$238,240