Question

Bonita Wings, Inc. manufactures airplanes for use in stunt shows. Bonita's factory is highly automated, using the latest in robotic technology. To keep costs low, the company employs as few factory workers as possible. Since each plane has different features (such as its shape, weight, and color), Bonita uses a job order costing system to accumulate product costs. At the end of 2020, Bonita's accountants developed the following expectations for 2021 based on the marketing department's sales forecast: Budgeted overhead cost Estimated machine hours Estimated direct labor hours Estimated direct materials cost $1,050.000 50,000 8,000 $1.500.000 Bonita's inventory count completed on December 31, 2020, revealed the following ending inventory balances: Raw Materials Inventory Work in Process Inventory Finished Goods Inventory $251.000 $625.000 $2.180,000 The company's 2021 payroll data revealed the following actual payroll costs for the year: Annual Total Hours Number Wage Rate Salary per Worked per Job Title Employed per Hour Employee Employee President and CEO 1 $224,000 Vice president and CFO 1 $178,000 Factory manager 1 $40,600 Assistant factory manager 1 $33.500 Machine operator 5 $15 2.250 Security guard, factory $20,400 Forklift operator $8 2,000 Corporate secretary 1 $36,400 Janitor, factory 2 $6 2.150 2 2 The following information was taken from Bonita's Schedule of Plant Assets. All assets are depreciated using the straight-line method

Answer 1

Answer:-

a) Calculation of the Predetermined Overhead Rate:-

Predetermined Overhead Rate = Budgeted Overhead/Budgeted Material Cost

=$1,050,000/$1,500,000 = 0.7 (or) 70%

Therefore, The Predetermined Overhead Rate is 70%

b) Journal Entries:-

Date	Particulars	Debit	Credit
1)	Administrative Expense (224,000 + 178,000 + 36,400)	$438,400
	Salaries Payable		$438,400
2)	Factory Overhead (40,600 + 33,500 + 20,400)	$94,500
	Salaries Payable		$94,500
3)	Work In Process (2250*$15 + 2000*$8 + 2150*6)	$62,650
	Wages Payable		$62,650
4)	Administrative Expense	$17,500
	Accumulated Depreciation - Administrative Office Equipment		$17,500
	(Depreciation = (Cost 650,000 - Salvage Value 125,000) / Useful life 30 = $17,500)
5)	Factory Overhead (192,500 + 165,000)	$357,500
	Accumulated Depreciation - Factory Building and Equipment		$357,500
	(Annual Depreciation Factory Building = (Cost 4,000,000 - Salvage Value 150,000) / Useful life 20 = $192,500)
	(Annual Depreciation Factory Equipment = (Cost 2,000,000 - Salvage Value 20,000) / Useful life 12 = $165,000)
6)	Administrative Expense (5,500 + 5,200)	$10,700
	Office Supplies		$5,200
	Accounts Payable		$5,500
7)	Factory Overhead (12,000 + 30,000)	$42,000
	Prepaid Insurance		$12,000
	Accounts Payable		$30,000
8)	Raw Materials Inventory	$1,946,000
	Accounts Payable		$1,946,000
9)	Work in process inventory (direct materials) (1,860,000*85%)	$1,581,000
	Factory Overhead (indirect materials) (1,860,000*15%)	$279,000
	Raw Materials Inventory		$1,860,000
10)	Work In Process Inventory (Direct materials $1,581,000*Predetermined OH Rate 70%)	$1,106,700
	Factory Overhead		$1,106,700
11)	Finished Goods Inventory	$3,450,000
	Work In Process Inventory		$3,450,000
12)	Accounts Receivable	$6,570,000
	Sales Revenue		$6,570,000
13)	Cost of Goods Sold (6,570,000/150%)	$4,380,000
	Finished Goods Inventory		$4,380,000

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