Question

G-Force Woodcraft manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labour intensive production process, so it assigns manufacturing overhead based on direct labour cost. G-Force expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2016, At the end of December 2018, G-Force reported work in process inventory (Job 551) of $93,000 The following events occurred during January 2019. i) Purchased materials on account, $392,000 1) Incurred manufacturing wages of $400,000 1) Requisitioned direct materials and used direct labour in manufacturing Direct Materials Direct Labour Job 551 $70,200 $61,200 Job 552 97,500 115,600 Job 553 105,300 78,200 Job 554 117,000 85,000 iv) Issued indirect materials to production, $30,000 v) Charged indirect manufacturing wages to production, $60,000 v) Other manufacturing overhead costs incurred on units 551 to 554 amounted to $134,000 vii) Allocated overheads to jobs at the predetermined rate vili) Units completed: 551, 552 & 554 ix) Sold units 551 & 554 (billed customers at a margin of 33/% on sales)

Answer 1

Answer with working is given below

e) Cost of Goods sold Less: Over absorbed Overheads Adjusted Cost of Goods Sold $528,740 -$14,000 $514,740 f) Cost of Goods Sold Job 551 Job 554 $261,500 Cost of Goods sold Less: Manufacturing OH variance Adjusted Cost of Goods sold Gross profit at 50 % Selling price $267,240 -$7,076 $260,164 $130,082 $390,246 -$6,924 $254,576 $127,288 $381,864 Gross profit of 33 1/3% on Selling price is equal to 50% on Cost of Goods Sold Journal Debit Credit $390,000 T Account for WwIP WIP Account To Material Inventory Account (Being issue of Direct material) WIP Account To Direct Labor (Being Direct Labor incurred) $390,000 WIP Account Opening Balance (Job 551) Direct Material Direct Labor Overhead applied $93,000 Finished Goods $340,000 $822,760 $340,000 (Job 551, 552 and 554 Completed) $390,000 Closing balance $340,000 (Job 553) $238,240 $238,000 WIP Account To Applied manufacturing overhead (Being manufacturing overhead applied) Finished Goods Account To WIP Account (Being transfer of completed jobs to Finished Goods Account) $238,000 $238,000 $1,061,000 $1,061,000 $822,760 $822,760 Closing Balance of WIP Account $238,240 Working note Job 551 Total Job 552 Job 553 Job 554 Direct Material Direct Labor $117,000 $85,000 $202,000 $97,500 $115,600 $213,100 $105,300 $78,200 $183,500 $70,200 $390,000 $340,000 $730,000 $61,200 $131,400 Prime Cost Overhead applied (70% of Direct Labor) Factory Cost of production Opening WIP $238,000 $42,840 $80,920 $54,740 $59,500 $968,000 $294,020 $174,240 $93,000 $238,240 $261,500 $93,000 $294,020 $238,240 $238,240 $0 $261,500 $1,061,000 $238,240 $822,760 $294,020 $528,740 $267,240 Closing WIP Cost of Goods Manufactured Less: Closing stock of FG $294,020 $267,240 $261,500 $294,020 $267,240 $0 $261,500 Cost of Goods Sold $0 Overhead absorption rate Manufacturing Overhead Direct Labor Cost $2,205,000 $3,150,000 70.0 % Actual Overhead Indirect Material Indirect Manufacturing labor Other manufacturing overhead Total overhead incurred $30,000 $60,000 $134,000 $224,000 Absorbed Overhead $238,000 Over absorbed -$14,000