Question

Froya Fabrikker A/Sergen, Norv is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company hours. Its predetermined overhead rate was based on a cost formula that estimated $370,500 of manufacturing overhead for an estimated allocation base of 950 direct labor-hours. The following transactions took place during the year job-orcer costing system that applies manufacturing overhead cost to jobs on the basis of direct labor- a. Raw materials purchased on account, $270,000. b. Raw materials used in production (all direct materials), $255,000. c. Utility bills incurred on account, $73.000 (90 % related to factory operations. and the remainder related to selling and administrative activities). d. Accrued salary and wage costs: Direct labor (1,030 hours) $300,000 $104,000 $180,000 Indirect 1abor Selling and administrative salaries e. Maintenance costs incurred on account in the factory, $68,000 f. Advertising costs incurred on account, $150,000. q. Depreciation was recorded for the year, $86,000 (75 % related to factory equipment, and the remainder related to sellina and administrative equipment). h. Rental cost incurred on account, $111,000 (80 % related to factory facilities, and the remainder related to selling and administrative facilities). i. Manufacturing overhead cost was applied to jobs, $? j. Cost of goods manufactured for the year, $910.000. k. Sales for the year (all on account) totaled $1,900,000. These goods cost $940,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: Raw Materials Work in Process Finished Goods $44,000 $35,000 $74,000

Answer 1

1 FROYA FABRIKKER A/S General journal entries to record transactions Transaction Dr Cr Raw Materials 2,70,000 a $ 2,70,000 Accounts Payable Work In Process b 2,55,000 $ 2,55,000 Raw Materials Manufacturing Overhead Selling and Aministrative Expense Accounts Payable Work In Process Manufacturing Overhea Selling and Aministrative Salaries Expense 65,700 C. S 7,300 73,000 $ 3,00,000 $ 1,04,000 $ 1,80,000 d $ 5,84,000 Salaries and Wages Payable Manufacturing Overhead 68,000 e Accounts Payable 68,000 $ |Advertising Expense Accounts Payable f. $ 1,50,000 $ 1,50,000 Manufacturing Overhead Depreciation Expense 64,500 21,500 Accumulated Depreciation 9 86,000 Manufacturing Overhead Rental Expense 88,800 h 22,200 Accounts Payable 1,11,000 POHR $370,500-950 $390DLH $401,700 1030DLH x $390 i. Work In Process 4,01,700 $ 4,01,700 Manufacturing Overhead iFinished Goods 9,10,000 $ 9,10,000 Work In Process k Accounts Receivable $19,00,000 19.00,000 Sales of Good C 9,40,000 $ 9,40,000 Finsihed Goods

2 FROYA FABRIKKER A/S Schedule of Cost of Goods Manufactured Direct Materials: Beginning Raw Materials 44.000 S 2,70,000 S3,14,000 Add: Net Purchase Raw Materials Cost of Raw Materials Available Deduct: Ending Raw Materials 59.000 Direct Materials Used 2,55,000 Direct Labour 3,00,000 Manufacturing overhead S 4,01,700 Total manufacturing costs Add: Work in process inventory, beginning 9,56,700 35,000 9,91,700 $ 81,700 process inventory, ending Deduct; Work 9,10,000 Cost of goods manufactured 3 Computing Manufacturing Overhead Under/over-applied. $ 3,91,000 $ 4,01,700 Actual Manufacturing Overhead Manufacturing Overhead Applied Overapplied Manufacturing Overhead (10,700) Transaction Manufacturing Overhead Dr Cr 10,700 Cost of Goods Sold 10.700 3 FROYA FABRIKKER A/S Schedule of Cost of Goods Sold Beginning Finished Goods Inventory 74,000 $ 9,10,000 Add: Cost of Goods Manufactured $ 9,84,000 Goods Available for Sale Deduct: Endind Finished Goods Inventory S 44,000 $ 9,40,000 Unadjusted cost of goods sold Deduct: Overapplied Manufacturing Overhead S 10,700 $ 9,29,300 Adjested Cost of Goods Sold 4 FROYA FABRIKKER A/S Income Statement Sales $19,00,000 S 9,29,300 9,70,700 Deduct: Cost of Goods Sold Gross Margin Selling and administrative expenses Utility Bills S 7,300 $ 1,80,000 Selling and Aministrative Salaries Expense Advertising Expense Depreciation Expense Rental Expense $ 1,50,000 21.500 22,200 3.81.000 Net operating expense 5,89,700

Accounts Receivable Sales |(k) 1900000 (k) 1900000 Cost of Goods Sold Raw Materials 44000 (b) $2,55,000 $9,40,000 Bal (k) $2,70,000 (a) $59,000 Bal Manufacturing Overhead $65,700) $1,04,000 $68,000 $ 64,500 Work in Process Bal 35000 (i $9,10,000 $4,01,700 c) $2,55,000 (b) (d) $3,00,000 (d) (e) $4,01,700 (g) C0) $ 81,700 $88,800 Bal h) $10,700 Bal Finished Goods Advertising Expense 74000 (k) Bal $9,40,000 $1,50,000 (f) $9,10,000 (j) $44,000 Bal Utilities Expense |(c) 7,300 Accumulated Depreciation |(g) $ 86,000 Accounts Payable |(a) |c) (e) $2,70,000 $ 73,000 $68,000 $1,50,000 $1,11,000 Salaries Expense $1,80,000 (d) |(f) |(h) Depreciation Expense $21,500 (g) Rent Expense $ 22,200 Salaries & Wages Payable (h) $5,84,000 (d)