Question

Scholastic Brass Corporation manufactures brass musical instruments for use by high school students. The company uses a normal costing system, in which manufacturing overhead is applied on the basis of direct-labor hours. The company’s budget for the current year included the following predictions.

Budgeted total manufacturing overhead ..........................................................................................................$426,300

Budgeted total direct-labor hours (based on practical capacity) .....................................................................20,300

During March, the firm worked on the following two production jobs: Job number T81, consisting of 76 trombones Job number C40, consisting of 110 cornetsThe events of March are described as follows:

a. One thousand square feet of rolled brass sheet metal were purchased on account for $5,000.

b. Four hundred pounds of brass tubing were purchased on account for $4,000.

c. The following requisitions were submitted on March 5: Direct labor: Job number T81, 800 hours at $20 per hour Direct labor: Job number C40, 900 hours at $20 per hour Indirect labor: General factory cleanup, $4,000 Indirect labor: Factory supervisory salaries, $9,000 Requisition number 112: 250 square feet of brass sheet metal at $5 per square foot (for job number T81) Requisition number 113: 1,000 pounds of brass tubing, at $10 per pound (for job number C40) Requisition number 114: 10 gallons of valve lubricant, at $10 per gallonAll brass used in production is treated as direct material. Valve lubricant is an indirect material.

d. An analysis of labor time cards revealed the following labor usage for March.

Direct labor: Job number T81, 800 hours at $20 per hour

Direct labor: Job number C40, 900 hours at $20 per hour Indirect labor:

General factory cleanup, $4,000 Indirect labor:

Factory supervisory salaries, $9,000

e. Depreciation of the factory building and equipment during March amounted to $12,000.

f. Rent paid in cash for warehouse space used during March was $1,200.

g. Utility costs incurred during March amounted to $2,100. The invoices for these costs were received, but the bills were not paid in March.

h. March property taxes on the factory were paid in cash, $2,400.

i. The insurance cost covering factory operations for the month of March was $3,100. The insurance policy had been prepaid.

j. The costs of salaries and fringe benefits for sales and administrative personnel paid in cash during March amounted to $8,000.

k. Depreciation on administrative office equipment and space amounted to $4,000.

l. Other selling and administrative expenses paid in cash during March amounted to $1,000.

m. Job number T81 was completed on March 20.

n. Half of the trombones in job number T81 were sold on account during March for $700 each.

The March 1 balances in selected accounts are as follows:

Cash ...................................................................................................................................................................$?? 10,000

Accounts Receivable .........................................................................................................................................21,000

Prepaid Insurance .............................................................................................................................................5,000

Raw-Material Inventory .....................................................................................................................................149,000

Manufacturing Supplies Inventory ....................................................................................................................500

Work-in-Process Inventory ................................................................................................................................91,000

Finished-Goods Inventory .................................................................................................................................220,000

Accumulated Depreciation: Buildings and Equipment .....................................................................................102,000

Accounts Payable ..............................................................................................................................................13,000

Wages Payable ..................................................................................................................................................8,000

Required:

1. Calculate the company’s predetermined overhead rate for the year.

2. Prepare journal entries to record the events of March.

3. Set up T-accounts, and post the journal entries made in requirement (2).

4. Calculate the overapplied or underapplied overhead for March. Prepare a journal entry to close this balance into Cost of Goods Sold.

5. Prepare a schedule of cost of goods manufactured for March.

6. Prepare a schedule of cost of goods sold for March.

7. Prepare an income statement for March.

NEED ALL SEVEN QUESTIONS ANSWERED PLEASE.

Answer 1

1. Company’s predetermined overhead rate for the year.

Given: MFG. OH is applied on the basis of direct-labor hours

So,predetermined OH application rate for the year= Budgeted mfg. OH/Budgeted Direct labor hrs.

ie.426300/20300=

21

2. Journal entries to record the events of March
Sl.No.	Account Title	Debit	Credit
a.	Raw materials Inventory	5000
	Accounts payable		5000
	(Purchase of direct material on a/c)
b.	Raw materials Inventory	4000
	Accounts payable		4000
	(Purchase of direct material on a/c)
c.	Direct labor	34000
	Mfg. OH	13000
	Cash		47000
	(Payment of direct& indirect labor)
d.	WIP Inventory-Job T81	17250
	Raw materials Inventory		1250
	Direct labor		16000
	(Issue of raw materials & labor to Job-T81)
	WIP Inventory-Job C40	28000
	Raw materials Inventory		10000
	Direct labor		18000
	(Issue of raw materials & labor to Job-C40)
	Mfg. OH	100
	Material supplies Inventory		100
	(Issue of Valve lubricant)
e.	Mfg. OH	12000
	Accumulated Depreciation-B&E		12000
	(Depn.factory building and equipment for March )
f.	Mfg. OH	1200
	Cash		1200
	(Rent paid for warehouse space)
g.	Mfg.OH	2100
	Accounts payable		2100
	(Utility costs in March)
h.	Mfg.OH	2400
	Cash		2400
	(March property taxes on the factory)
i.	Mfg.OH	3100
	Prepaid Insurance		3100
	Insurance cost expensed for March)
j.	Wages payable	8000
	Cash		8000
	(Salaries & fringe benefits for sales & admn. For March)
k.	Depreciation	4000
	Accumulated Depreciation-B&E		4000
	(Depn. on administrative office equipment & space)
l.	Selling& admn. Expenses	1000
	Cash		1000
	(Other selling & administrative expenses paid in March)
m.	WIP Inventory-Job T81	16800
	Mfg. OH		16800
	(Mfg. OH applied(800*21) on the basis of D/L hrs.)
	WIP Inventory-Job C40	18900
	Mfg. OH		18900
	(Mfg. OH applied(900*21) on the basis of D/L hrs.)
	Finished Goods	34050
	WIP-Job T81		34050
	(1250+16000+16800)
	COGS	17025
	Finished Goods		17025
	(34050/76*38)
	Mfg. OH	1800
	COGS		1800
	(Over-applied OH-35700-33900)
n.	Accounts receivables	26600
	Sales Revenue		26600
	(700*38)
		250325	250325

	LEDGER ACCOUNTS			Net Ledger balances
Sl.No.	Account Title	Debit	Credit	Debit	Credit
	Beginning Balance		13000
	Accounts payable		5000
	Accounts payable		4000
	Accounts payable		2100		24100
	Beginning Balance	21000
n.	Accounts receivables	26600		47600
	Beginning Balance		102000
	Accumulated depreciation-B&E		12000
	Accumulated depreciation-B&E		4000		118000
	Beginning Balance	10000
	Cash		47000
	Cash		1200
	Cash		2400
	Cash		8000
	Cash		1000		49600
	COGS	17025
	COGS		1800	15225
k.	Depreciation	4000		4000
c.	Direct labor	34000
	Direct labor		16000
	Direct labor		18000	0
	Beginning balance	220000
	Finished Goods	34050
	Finished Goods		17025	237025
	Beginning balance	500
	Material supplies Inventory		100	400
	Mfg. OH	100
e.	Mfg. OH	12000
f.	Mfg. OH	1200
	Mfg. OH		16800
	Mfg. OH		18900
	Mfg. OH	13000
	Mfg. OH	1800
g.	Mfg.OH	2100
h.	Mfg.OH	2400
i.	Mfg.OH	3100		0
	Beginning balance	5000
	Prepaid Insurance		3100	1900
	Beginning balance	149000
a.	Raw materials Inventory	5000
b.	Raw materials Inventory	4000
	Raw materials Inventory		1250
	Raw materials Inventory		10000	146750
	Beginning balance		8000
j.	Wages payable	8000			0
	Sales Revenue		26600		26600
l.	Selling& admn. Expenses	1000		1000
	Beginning balance	91000
	WIP Inventory-Job C40	28000
	WIP Inventory-Job C40	18900
d.	WIP Inventory-Job T81	17250
m.	WIP Inventory-Job T81	16800
	WIP Inventory-Job T81		34050	137900
		746825	373325	591800	218300
	Diff. due to posting of Op. bal.		373500		373500

4...Mfg. OH a/c
	Debit	Credit
Indirect &supervisory labor	13000
Valve lubricant	100
Accumulated depreciation	12000
Rent	1200
Utilities	2100
Property taxes	2400
Insurance	3100
Applied to WIP-Job T81		16800
Applied to WIP-Job C40		18900
Over-applied trf.to COGS	1800
	35700	35700
Hence the Journal Entry
Mfg. OH	1800
COGS		1800
(Over-applied OH-35700-33900) tfrd. To COGS

5..Cost of Goods Manufactured for March
Beginning Work-in process Inventory		91000
Add: Raw materials consumed during March:
Opening raw materials	149000
Add: Purchases	9000
Less: Closing raw materials	-146750	11250
Add: Direct labor		34000
Add: Mfg. OH applied		35700
Total manufacturing costs incurred		171950
Less: Ending WIP inventory		-137900
Cost of Goods Manufactured during March		34050
(Ie. Job-T81--D/M 1250+D/l 16000+Applied Mfg.OH 16800)

6..Cost of Goods sold for March
Beginning finished goods inventory	220000
Add: Cost of goods manufactured	34050
Cost of goods available for sale	254050
Less: Ending Finished goods inventory	-237025
Cost of Goods sold	17025
Adjusted for -- Mfg. OH over-applied	-1800
Cost of Goods sold for March	15225

7.. Income statement for March
Sales Revenue		26600
Less: COGS ( as above)		-15225
Gross Margin		11375
Less: Operating Expenses :
Depn. on administrative office equipment & space	4000
Selling& admn. Expenses	1000	-5000
Income from operations for March		6375