Question

Dream Makers is a small manufacturer of gold and platinum Jewelry. It uses a job costing system that applies overhead on the basis of direct labor hours. Budgeted factory overhead for the year was $455,600, and management budgeted 33,500 direct labor-hours. The company had no Materials, Work-in-process, or Finished Goods Inventory at the beginning of April. These transactions were recorded during April: a. April Insurance cost for the manufacturing property and equipment was $1,800. The premium had been paid in January b. Recorded $1,025 depreciation on an administrative asset. c. Purchased 21 pounds of high-grade polishing materials at $16 per pound (indirect materials). The purchase was on credit. d. Paid factory utility bill, $6,510, in cash, e. Incurred 4.000 hours and paid payroll costs of $160,000. Of this amount 1,000 hours and $20,000 were indirect labor costs. f. Incurred and paid other factory overhead costs, $6,270. 9. Purchased $24,500 of materials. Direct materials included unpolished semiprecious stones and gold. Indirect materials included supplies and polishing materials. The purchase was on credit. h. Requisitioned $18,500 of direct materials $1.600 of indirect materials from Materials Inventory I. Incurred and paid miscellaneous selling and administrative expenses, $5,660 1. Incurred $3,505 depreciation on manufacturing equipment for April k. Pald advertising expenses in cash, $2.650. I. Applied factory overhead to production on the basis of direct labor hours. m. Completed goods costing $64,000 during the month. n. Made sales on account in April, $56,410. The Cost of Goods Sold was $47,860. Required: 1. Compute the firm's predetermined factory overhead rate for the year. 2. Prepare journal entries to record the April events. 3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Sold account on April 30. 4. Prepare a schedule of Cost of Goods Manufactured and a schedule of Cost of Goods Sold 5. Prepare the income statement for April Complete this question by entering your answers in the tabs below. < Prev 17 of 19 !! Next >

Answer 1

1. Predetermined factory overhead rate = $ 455,600 / 33,500 DLH = $ 13.60 per direct labor hour

2.

Transaction / Event	Account Titles	Debit	Credit
		$	$
a.	Factory Overhead	1,800
	Prepaid Insurance		1,800
b.	Depreciation Expense	1,025
	Accumulated Depreiation		1,025
c.	Materials Inventory	336
	Accounts Payable		336
d.	Factory Overhead	6,510
	Cash		6,510
e.	Work in Process Inventory	140,000
	Factory Overhead	20,000
	Cash		160,000
f.	Factory Overhead	6,270
	Cash		6,270
g.	Materials Inventory	24,500
	Accounts Payable		24,500
h.	Work in Process Inventory	18,500
	Factory Overhead	1,600
	Materials Inventory		20,100
i.	Miscellaneous Expense	5,660
	Cash		5,660
j.	Factory Overhead	3,505
	Accumulated Depreciation		3,505
k.	Advertising Expense	2,650
	Cash		2,650
l.	Work in Process Inventory	40,800
	Factory Overhead		40,800
m.	Finished Goods Inventory	64,000
	Work in Process Inventory		64,000
n. i.	Accounts Receivable	56,410
	Sales		56,410
n.ii.	Cost of Goods Sold	47,860
	Finished Goods Inventory		47,860

3. Factory overhead overapplied : $ 1,115

Factory overhead incurred	$ 39,685
Factory overhead applied	40,800
Factory overhead overapplied	$ (1,115)

4.

Schedule of Cost of Goods Manufactured For the month ended April 30
Beginning work in process inventory	$ 0
Direct materials used	18,500
Direct labor	140,000
Factory overhead applied	40,800
Total Manufacturing Costs	199,300
Total cost or work in process inventory	199,300
Less: Ending work in process inventory	(135,300)
Cost of Goods Manufactured	$ 64,000

Schedule of Cost of Goods Sold
Beginning finished goods inventory	$ 0
Add: Cost of goods manufactured	64,000
Cost of goods available for sale	64,000
Less: Ending finished goods inventory	(16,140)
Cost of goods sold ( Unadjusted )	47,860
Less: Adjustment for overapplied factory overhead	(1,115)
Cost of Goods Sold ( Adjusted )	$ 46,745

5.

Income Statement For the month ended April 30
Sales		$ 56,410
Cost of Goods Sold		46,745
Gross Profit		9,665
Selling and Administrative Expenses
Advertising Expense	$ 2,650
Depreciation Expense	1,025
Miscellaneous Expense	5,660
Total Selling and Administrative Expenses		9,335
Net Income		$ 330