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:
Direct labor (1,135 hours) | $ | 260,000 |
Indirect labor | $ | 96,000 |
Selling and administrative salaries | $ |
140,000 |
The balances in the inventory accounts at the beginning of the year were:
Raw Materials | $ | 36,000 |
Work in Process | $ | 27,000 |
Finished Goods | $ | 66,000 |
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.
Predetermined overhead rate = $349800/1060 = $330 per direct labor hour
1.
Transaction | General Journal | Debit | Credit |
a. | Raw materials | 230000 | |
Accounts payable | 230000 | ||
(To record raw materials purchased on account) | |||
b. | Work in process | 215000 | |
Raw Materials | 215000 | ||
(To record direct materials used in production) | |||
c. | Manufacturing overhead ($65000 x 85%) | 55250 | |
Utilities expense ($65000 x 15%) | 9750 | ||
Accounts Payable | 65000 | ||
(To record utility bills incurred on account) | |||
d. | Work in process | 260000 | |
Manufacturing overhead | 96000 | ||
Salaries expense | 140000 | ||
Salaries and wages payable | 496000 | ||
(To record salary and wage costs incurred) | |||
e. | Manufacturing overhead | 60000 | |
Accounts payable | 60000 | ||
(To record maintenance costs incurred on account in factory) | |||
f. | Advertising expense | 142000 | |
Accounts payable | 142000 | ||
(To record advertising costs incurred on account) | |||
g. | Manufacturing overhead ($90000 x 75%) | 67500 | |
Depreciation expense ($90000 x 25%) | 22500 | ||
Accumulated depreciation | 90000 | ||
(To record depreciation for the year) | |||
h. | Manufacturing overhead ($115000 x 80%) | 92000 | |
Rent expense ($115000 x 20%) | 23000 | ||
Accounts Payable | 115000 | ||
(To record rental cost incurred on account) | |||
i. | Work in process (1135 x $330) | 374550 | |
Manufacturing overhead | 374550 | ||
(To record manufacturing overhead applied) | |||
j. | Finished goods | 830000 | |
Work in process | 830000 | ||
(To record goods completed and transferred to finished goods) | |||
k(1) | Accounts receivable | 1500000 | |
Sales | 1500000 | ||
(To record sales on account) | |||
k(2) | Cost of goods sold | 860000 | |
Finished goods | 860000 | ||
(To record cost of sales) |
2.
Finished Goods | Advertising Expense | |||||||
Beg. Bal. | 66000 | Beg. Bal. | 0 | |||||
j. | 830000 | 860000 | k(2) | f. | 142000 | |||
End. Bal. | 142000 | |||||||
End. Bal. | 36000 | |||||||
Accumulated Depreciation | Utilities Expense | |||||||
Beg. Bal. | 0 | Beg. Bal. | 0 | |||||
90000 | g. | c. | 9750 | |||||
End. Bal. | 90000 | End. Bal. | 9750 | |||||
Accounts Payable | Salaries Expense | |||||||
Beg. Bal. | 0 | Beg. Bal. | 0 | |||||
230000 | a. | d. | 140000 | |||||
65000 | c. | |||||||
60000 | e. | End. Bal. | 140000 | |||||
142000 | f. | |||||||
115000 | h. | |||||||
End. Bal. | 612000 | |||||||
Depreciation Expense | Salaries and Wages Payable | |||||||
Beg. Bal. | 0 | Beg. Bal. | 0 | |||||
g. | 22500 | 496000 | d. | |||||
End. Bal. | 22500 | End. Bal. | 496000 | |||||
Rent Expense | ||||||||
Beg. Bal. | 0 | |||||||
h. | 23000 | |||||||
End. Bal. | 23000 |
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 $380,000 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 $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,...
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 $380,000 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...
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Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labo hoursIts 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 laborhours. The following transactions took place during the year Froya Fabrikker A/S of Bergen, Norway,...
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 and 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 (all purchases and services were...
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,...