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 $350,000 of manufacturing overhead for an estimated allocation base of 1,000 direct labor-hours. The following transactions took place during the year:
Direct labor (1,075 hours) | $ | 280,000 |
Indirect labor | $ | 100,000 |
Selling and administrative salaries | $ |
160,000 |
The balances in the inventory accounts at the beginning of the year were:
Raw Materials | $ | 40,000 |
Work in Process | $ | 31,000 |
Finished Goods | $ | 70,000 |
Required:
1. Prepare journal entries to record the preceding transactions.
2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.
ods manufactured for the year, $870,000. Sales for the year (all on account) totaled $1,700,000. These goods cost $900,000 according to their job cost sheets.
1) | |||||||
a. | Raw Materials | 250000 | |||||
Accounts Payable | 250000 | ||||||
b. | Work in Process | 235000 | |||||
Raw Materials | 235000 | ||||||
c. | Manufacturing Overhead | 62100 | |||||
Utilities Expense | 6900 | ||||||
Accounts Payable | 69000 | ||||||
d. | Work in Process | 280,000 | |||||
Manufacturing Overhead | 100,000 | ||||||
Salaries Expense | 160,000 | ||||||
Salaries and Wages Payable | 540000 | ||||||
e. | Manufacturing Overhead | 64000 | |||||
Accounts Payable | 64000 | ||||||
f. | Advertising Expense | 146000 | |||||
Accounts Payable | 146000 | ||||||
g. | Manufacturing Overhead = 75% x $82000 | 61500 | |||||
Depreciation Expense | 20500 | ||||||
Accumulated Depreciation | 82000 | ||||||
h. | Manufacturing Overhead ($107,000 x 80%) | 85600 | |||||
Rent Expense | 21400 | ||||||
Accounts Payable | 107000 | ||||||
i. | Work in Process | 376250 | |||||
Manufacturing Overhead | 376250 | ||||||
Predetermined overhead rate = $350,000/1000DLH | 350 | ||||||
1075 actual DLH × $350 per DLH = $376,250 | |||||||
j. | Finished Goods | $ 870,000.00 | |||||
Work in Process | $ 870,000.00 | ||||||
k. | Accounts Receivable | $1,700,000.00 | |||||
Sales | $1,700,000.00 | ||||||
Cost of Goods Sold | $ 900,000.00 | ||||||
Finished Goods | $ 900,000.00 | ||||||
Accounts Receivable | Sales | ||||||
(k) | 1,700,000 | 1,700,000 | (k) | ||||
Raw Materials | Cost of Goods Sold | ||||||
Bal. | 40,000 | 235000 | (b) | (k) | 900,000 | ||
(a) | 250,000 | ||||||
Bal. | 55,000 | ||||||
Work in Process | Manufacturing Overhead | ||||||
Bal. | 31,000 | $ 870,000.00 | (j) | (c) | 62,100 | 376250 | (i) |
(b) | 235,000 | (d) | 100,000 | ||||
(d) | 280,000 | (e) | 64000 | ||||
(i) | 376,250 | (g) | 61500 | ||||
Bal. | 52,250 | (h) | 85600 | ||||
3,050 | Bal. | ||||||
Finished Goods | Advertising Expense | ||||||
Bal. | 70,000 | $ 900,000.00 | (k) | (f) | 146000 | ||
(j) | 870,000 | ||||||
Bal. | 40,000 | ||||||
Accumulated Depreciation | Utilities Expense | ||||||
82000 | (g) | (c) | 6900 | ||||
Accounts Payable | Salaries Expense | ||||||
250000 | (a) | (d) | 160,000 | ||||
69000 | (c) | ||||||
64000 | (e) | Depreciation Expense | |||||
146000 | (f) | (g) | 20500 | ||||
107000 | (h) | ||||||
636000 | Bal. | ||||||
Salaries & Wages Payable | Rent Expense | ||||||
540000 | (d) | (h) | 21400 | ||||
3) | |||||||
Froya Fabrikker A/S | |||||||
Schedule of Cost of Goods Manufactured | |||||||
Direct materials: | |||||||
Raw materials inventory, beginning | 40,000 | ||||||
Purchases of raw materials | 250,000 | ||||||
Materials available for use | 290,000 | ||||||
Raw materials inventory, ending | -55,000 | ||||||
Materials used in production | 235,000 | ||||||
Direct labor | 280,000 | ||||||
Manufacturing overhead applied to work in process | 376250 | ||||||
Total manufacturing costs | 891,250 | ||||||
Add: Work in process, beginning | 31,000 | ||||||
922,250 | |||||||
Deduct: Work in process, ending | -52,250 | ||||||
Cost of goods manufactured | 870,000 | ||||||
4) | Manufacturing Overhead | 3,050 | |||||
Cost of Goods Sold | 3,050 | ||||||
Schedule of cost of goods sold: | |||||||
Finished goods inventory, beginning | 70,000 | ||||||
Add: Cost of goods manufactured | 870,000 | ||||||
Goods available for sale | 940,000 | ||||||
Deduct finished goods inventory, ending | -40,000 | ||||||
Unadjusted cost of goods sold | 900,000 | ||||||
Deduct: Overapplied overhead | -3,050 | ||||||
Adjusted cost of goods sold | 896,950 | ||||||
5) | Froya Fabrikker A/S | ||||||
Income Statement | |||||||
Sales | 1,700,000 | ||||||
Less cost of goods sold | 896,950 | ||||||
Gross margin | 803,050 | ||||||
Less selling and administrative expenses: | |||||||
Advertising expense | 146000 | ||||||
Utilities expense | 6,900 | ||||||
Salaries expense | 160,000 | ||||||
Depreciation expense | 20,500 | ||||||
Rent expense | 21400 | 354800 | |||||
Net operating income | 448,250 | ||||||
Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for...
Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil Telds. 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 $350,000 of manufacturing overhead for an estimated allocation base of 1,000 direct labor-hours. The following transactions took place during the year a Raw materials purchased...
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 $350,000 of manufacturing overhead for an estimated allocation base of 1,000 direct labor-hours. The following transactions took place during the year: Raw materials purchased on account,...
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 $349,800 of manufacturing overhead for an estimated allocation base of 1,060 direct labor-hours. The following transactions took place during the year: Raw materials purchased on account,...
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 $374,000 of manufacturing overhead for an estimated allocation base of 1,100 direct labor-hours. The following transactions took place during the year: Raw materials purchased on account,...
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...
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 $349,800 of manufacturing overhead for an estimated allocation base of 1,060 direct labor-hours. The following transactions took place during the year:Raw materials purchased on account, $230,000.Raw...
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 $350,000 of manufacturing overhead for an estimated allocation base of 1,000 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased...
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 $374,000 of manufacturing overhead for an estimated allocation base of 1,100 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased...
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 $399,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year: Raw materials purchased on account,...
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 $395,600 of manufacturing overhead for an estimated allocation base of 920 direct labor-hours. The following transactions took place during the year: Raw materials purchased on account,...