Question

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 $329,000 of manufacturing overhead for an estimated allocation base of 940 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $205,000. b. Raw materials used in production (all direct materials). $190,000. c. Utility bills incurred on account, $60,000 (90% related to factory operations, and the remainder related to selling and administrative activities) d. Accrued salary and wage costs: Direct labor (1,015 hours) Indirect labor Selling and administrative salaries $ 235,000 $ 91,000 $ 115,000 e. Maintenance costs incurred on account in the factory, $55,000 f. Advertising costs incurred on account, $137,000. g. Depreciation was recorded for the year, $85,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on account, $110,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities) Manufacturing overhead cost was applied to jobs, $? J. Cost of goods manufactured for the year. $780,000. k. Sales for the year (all on account) totaled $1,250,000. These goods cost $810,000 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 $ 31,000 $ 22,000 $ 61,000

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Answer 1

PARTICULARS	AMOUNT	AMOUNT
TOTAL
	DIRECT MATERIAL-PURCHASED	205,000
ADD	OP STOCK OF RAW MATERIAL	31,000
LESS	CL STOCK OF RAW MATERIAL	46,000
	MATERIAL CONSUMED	190,000
ADD	DIRECT WAGES	235,000
ADD	DIRECT EXPENSES	0
	PRIME COST	425,000
ADD	WORKS OR FACTORY OVERHEADS
	Factory Overheads	355,250
ADD	OP STOCK OF WIP	22,000
LESS	CL STOCK OF WIP	0
	WORK COST	802,250
ADD	ADMINISTRATION OR OFFICE OVERHEADS	0
	COST OF PRODUCTION	802,250
ADD	SELLING AND DISTRIBUTION OVERHEADS	311,000
LESS	MANUFACTURING OVERHEAD (Overapplied)	13,250
ADD	OP STOCK OF FG	61,000
LESS	CL STOCK OF FG	0
	COST OF SALES	1161,000
ADD	PROFIT MARGIN	89,000
	SELLING PRICE	1250,000

205,0tro or 235,000 935, ovo Journal Entries (1) Rain mintesine Inventory 121 205, ovo to Accounts Payable (2) labor Cast to wages Payable (3) manufaefensing Oroshand of 242,000 to Utilities C.60000 x 904) 54, ovo a 1,000 to Caher cost (indirect) IS, Ovo to repair is, maintenance to Repreintion 59,500 to other coste (Rental) () 82,500 .10) work in pooless inventory By/780,250 to raw materine 190, ovo - to. Direct Enbor cost 285,000 to manufacturing oneshands (8) finished Goods Inventory. Dr 980,210 to. wook in process inventory 180,250 (6). Manufetering Over med to finished Goods Inventory (255,250 - 342,000) (7) Cost of Sulus Or 1096,250 to finished Goods inventory 780,250 to Pelling & Distribution Orusheads (8) Accounts Receivables Or ช (, 250.000 to Inbel 255.250 $ br 13,250 13,ISO 3tl,000 4, 2saoto .

Raw materials Inventory All To. Balance ble $1,000 By work in Process To Accounts Payable 205,000 Inventory By balance old 190,obo 46,000 236,000 836,000 work in process. Inventory to Balance bid 22,000 By Finished Goods TO Raw materine 802,250 190,000 Inventory To Direct labor cost 235,000 to manufacturing Over hends 255,250 802,250 1-802,250 finished Goods Inventory To Bulanca bld To work in Pare est 61,000 By: manu faretursing overheads 12,250 802,250 By . Cost of sales 1850,000 863,250 969,250