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:
Direct labor (1,100 hours) |
$ |
310,000 |
Indirect labor |
$ |
106,000 |
Selling and administrative salaries |
$ |
190,000 |
The balances in the inventory accounts at the beginning of the year were:
Raw Materials |
$ |
46,000 |
Work in Process |
$ |
37,000 |
Finished Goods |
$ |
76,000 |
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.
1.
Transaction / Event | Account Titles | Debit | Credit |
$ | $ | ||
a. | Raw Materials Inventory | 280,000 | |
Accounts Payable | 280,000 | ||
b. | Work in Process Inventory | 265,000 | |
Raw Materials Inventory | 265,000 | ||
c. | Manufacturing Overhead | 60,000 | |
Utilities Expense | 15,000 | ||
Utilities Payable | 75,000 | ||
d. | Work in Process Inventory | 310,000 | |
Manufacturing Overhead | 106,000 | ||
Selling and Administrative Salaries | 190,000 | ||
Salaries and Wages Payable | 606,000 | ||
e. | Manufacturing Overhead | 70,000 | |
Accounts Payable | 70,000 | ||
f. | Advertising Expense | 152,000 | |
Accounts Payable | 152,000 | ||
g. | Manufacturing Overhead | 74,800 | |
Depreciation Expense | 13,200 | ||
Accumulated Depreciation | 88,000 | ||
h. | Manufacturing Overhead | 101,700 | |
Rent Expense | 11,300 | ||
Rent Payable | 113,000 | ||
i. | Work in Process Inventory | 418,000 | |
Manufacturing Overhead ( 399,000 / 1,050) * 1,100 | 418,000 | ||
j. | Finished Goods Inventory | 930,000 | |
Work in Process Inventory | 930,000 | ||
k.1. | Accounts Receivable | 2,000,000 | |
Sales Revenue | 2,000,000 | ||
k.2 | Cost of Goods Sold | 960,000 | |
Finished Goods Inventory | 960,000 |
2.
Raw Materials Inventory | |||
Beginning balance | 46,000 | b. | 265,000 |
a. | 280,000 | ||
Ending balance | 61,000 | ||
Work in Process Inventory | |||
Beginning balance | 37,000 | j. | 930,000 |
b. | 265,000 | ||
d. | 310,000 | ||
i. | 418,000 | ||
Ending balance | 100,000 | ||
Finished Goods Inventory | |||
Beginning balance | 76,000 | k. | 960,000 |
j. | 930,000 | ||
Ending balance | 46,000 | ||
Manufacturing Overhead | |||
c. | 60,000 | i. | 418,000 |
d. | 106,000 | ||
e. | 70,000 | ||
g. | 74,800 | ||
h. | 101,700 | ||
Balance ( Overapplied ) | 5,500 | ||
Cost of Goods Sold | |||
k. | 960,000 | ||
3.
Schedule of Cost of Goods Manufactured | |
Direct materials used | $ 265,000 |
Direct labor | 310,000 |
Manufacturing overhead | 418,000 |
Total Manufacturing Costs | 993,000 |
Add: Beginning work in process | 37,000 |
Total cost of work in process | 1,030,000 |
Less: Ending Work in Process | 100,000 |
Cost of Goods Manufactured | 930,000 |
4. A.
Debit | Credit | |
Manufacturing Overhead | 5,500 | |
Cost of Goods Sold | 5,500 |
4. B.
Schedule of Cost of Goods Sold | |
Beginning finished goods inventory | $ 76,000 |
Add: Cost of goods manufactured | 930,000 |
Cost of goods available for sale | 1,006,000 |
Less: Ending finished goods inventory | 46,000 |
Unadjusted Cost of goods sold | 960,000 |
Less: Manufacturing overhead overapplied | 5,500 |
Adjusted Cost of Goods Sold | $ 954,500 |
5.
Income
Statement For the year ended..... |
|
Sales Revenue | $ 2000,000 |
Less: Cost of Goods Sold | 954,500 |
Gross Profit | 1,045,500 |
Selling and Administrative Expenses | |
Advertising Expense | 152,000 |
Salaries and Wages Expense | 190,000 |
Rent Expense | 11,300 |
Utilities Expense | 15,000 |
Depreciation Expense | 13,200 |
Net Operating Income | $ 664,000 |
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 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 $357,000 of manufacturing overhead for an estimated allocation base of 1,020 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 $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 $395,600 of manufacturing overhead for an estimated allocation base of 920 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 $388,800 of manufacturing overhead for an estimated allocation base of 810 direct labor-hours. The following transactions took place during the year. a. Raw materials purchased on...
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 $372,000 of manufacturing overhead for an estimated allocation base of 1,200 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 $380,000 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 $372,000 of manufacturing overhead for an estimated allocation base of 1,200 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,...