Question

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 $342,000 of manufacturing overhead for an estimated allocation base of 950 direct labor-hours. The following transactions took place during the year:

1. Raw materials purchased on account, $210,000. 2. Raw materials used in production (all direct materials), $195,000. 3. Utility bills incurred on account, $61,000 (95% related to factory operations, and the remainder related to selling and administrative activities). 4. Accrued salary and wage costs:

Direct labor (1,025 hours)	$	240,000
Indirect labor	$	92,000
Selling and administrative salaries	$	120,000

5. Maintenance costs incurred on account in the factory, $56,000
6. Advertising costs incurred on account, $138,000.
7. Depreciation was recorded for the year, $86,000 (75% related to factory equipment, and the remainder related to selling and administrative equipment).
8. Rental cost incurred on account, $111,000 (80% related to factory facilities, and the remainder related to selling and administrative facilities).
9. Manufacturing overhead cost was applied to jobs, $ ? .
10. Cost of goods manufactured for the year, $790,000.
11. Sales for the year (all on account) totaled $1,300,000. These goods cost $820,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

Raw Materials	$	32,000
Work in Process	$	23,000
Finished Goods	$	62,000

Required:Req 2-Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above)

Req 3 -Prepare a schedule of cost of goods manufactured.

Req 4A- Record the 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. Req 5- Prepare an income statement for the year.

Answer 1

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answer 4A)    manufacturing overhead DR 9,750

cost of goods sold CR 9,750