Question

Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $68,000 of manufacturing overhead for an estimated activity level of $40,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Raw materials Work in process Finished goods $ 10,400 $ 4,900 $ 8,900 During the year, the following transactions were completed: a. Raw materials purchased on account, $ 169,000. b. Raw materials used in production, $147,000 (materials costing $126,000 were charged directly to jobs; the remaining materials were indirect). C. Costs for employee services were incurred as follows: Direct labor Indirect labor Sales commissions Administrative salaries $ 156,000 $ 182,000 $ 25,000 $ 45,000 d. Rent for the year was $18,900 ($13,900 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $20,000. f. Advertising costs incurred, $15,000. g. Depreciation recorded on equipment, $21,000.($15,000 of this amount related to equipment used in factory operations; the remaining $6,000 related to equipment used in selling and administrative activities.) h. Record the manufacturing overhead cost applied to jobs. i. Goods that had cost $226,000 to manufacture according to their job cost sheets were completed. j. Sales for the year (all paid in cash) totaled $509,000. The total cost to manufacture these goods according to their job cost sheets was $218,000.

Answer 1

Answer-1:

No.	Account Title	Debit	Credit
a.	Raw material inventory	$ 169,000
	Account payable		$ 169,000
b.	Work in process inventory	126,000
	Manufacturing overhead	21,000
	Raw material inventory		147,000
c.	Work in process inventory	156,000
	Manufacturing overhead	182,000
	Sales commission	25,000
	Administrative salaries	45,000
	Salaries payable		408,000
d.	Manufacturing overhead	13,900
	Selling and administrative expense	5,000
	Account payable		18,900
e.	Manufacturing overhead	20,000
	Account payable		20,000
f.	Advertising expense	15,000
	Account payable		15,000
g.	Manufacturing overhead	15,000
	Depreciation expense	6,000
	Accumulated depreciation		21,000
h.	Work in process inventory	265,200
	Manufacturing overhead (156,000 × 170%)		265,200
i.	Finished goods inventory	226,000
	Work in process inventory		226,000
j.	Cash	509,000
	Sales		509,000
k.	Cost of goods sold	218,000
	Finished goods inventory		218,000

Answer-2:

RM Inventory 10400 147000 169000 WIP Inventory 4900 226000 126000 156000 265200 FG Inventory 8900 218000 226000 Cost of goods sold 218000 Manufacturing overhead 21000 265200 182000 13900 20000 15000 13300 32400 3261001 16900

Answer-3A:

Manufacturing overhead is over-applied by $13,300.

Answer-3B:

Manufacturing overhead	13,300
Cost of goods sold		13,300
(to close over applied balance to COGS)