Question

CAN YOU HELP WITH 7-9 PLEASE 1-6 HAVE BEEN ANSWERED

Bluethorn Company uses normal costing in its job-costing system. Partially completed T-accounts and additional information for Bluethorn for 2017 are as follows: F: (Click the icon to view the T-accounts.) i (Click the icon to view the additional information.) Read the requirements. Requirement 1. What was the amount of direct materials issued to production during 2017? More Info Direct materials issued to production during 2017 was $ T-accounts a. Direct manufacturing labor wage rate was $12 per hour. b. Manufacturing overhead was allocated at $16 per direct manufacturing labor-hour. During the year, sales revenues were $1,020,000, and marketing and distribution costs were $120,000 C. Direct Materials Control Work-in-Process Control Finished Goods Control 1-1-2017 46,000 233,000 1-1-2017 43,000 1-1-2017 11,000 667,800 132,000 Dir. Manuf. 923,920 Print Done labor 354,000 Manufacturing Overhead Allocated Cost of Goods Sold Manufacturing Overhead Control 509,000 Requirements Print Done 1. What was the amount of direct materials issued to production during 2017? 2. What was the amount of manufacturing overhead allocated to jobs during 2017? 3. What was the total cost of jobs completed during 2017? 4. What was the balance of work-in-process inventory on December 31, 2017? 5. What was the cost of goods sold before proration of under-or overallocated overhead? 6. What was the under-or overallocated manufacturing overhead in 2017? 7. Dispose of the under- or overallocated manufacturing overhead using the following: a. Write-off to Cost of Goods Sold b. Proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold 8. Using each of the approaches in requirement 7, calculate Bluethorn's operating income for 2017. 9. Which approach in requirement 7 do you recommend Bluethorn use? Explain your answer briefly.

Answer 1

We will calculate underapplied overhead
Actual MO-Applied MO
509000-472000	$37000
(see the working after the answers)
answer 7	Accounts Title	DR	Cr
a)	Cost of Good sold	37000
	Manufacturing overhead		37000
	Balance of Cost of good sold after write off	$704800
	(667800+37000)
	Now we will divide under applied overhead prorata

		Balance before proration A	% of total	Under applied MO	Allocated B	Ending balance after proration A+B
b)	Work In process Control	$178080	16	37000	5920	184000
	Finsihed Goods control	267120	24	37000	8880	276000
	Cost of Good sold	667800	60	37000	22200	690000
	Total	1113000			37000

Journal entry is	DR	CR
Work In process Control	5920
Finsihed Goods control	8880
Cost of Good sold	22200
Manufacturing overhead		37000

ans 8
a)	Calcualtion of Operating income
	Sales	1020000
	Less: cost of good sold	704800
	Less:Marketing & distribution expenses	120000
	Operating income	195200
b)	Calcualtion of Operating income
	Sales	1020000
	Less: cost of good sold	690000
	Less:Marketing & distribution expenses	120000
	Operating income	210000

ans 9

I would recommend to use second approach as it divides the under applied overhead between work in process, finsihed goods and cost of good sold according the % used by these. When the amount is material it is better to divide the under applied overhead to these three accounts according to their ending balances (before proration) and when the amount oi immaterial than we should write off the under /over applied overhead to cost of good sold. Hence in thiscase 7b is better to be used

working

First we have to calculate the ending balance of COGS,WIP and Finished Goods inventory to write off/charge under applied overhead

Work In process Control
01-01-2017	43000	FG	923920
Dircr material	233000
Direct manuf. Labor	354000
Manufacturing overhead	472000
ending balance	178080
Calculation of direct labor hours
Direct manuf. Labor/Direct labor rate
354000/12	29500
Manufacturing overhead allocated
29500*16	472000
Finsihed Goods control
01-01-2017	11000	COGS	667800
WIP	923920
Ending balance	267120
Cost of Good sold
FG	667800

If any doubt please comment