Question

PA2-8 Recording Manufacturing Costs, Preparing a Cost of Goods Manufactured Report, and Calculating Income from Operations [LO 2-3, 2-4, 2-5, 2-6]

Dobson Manufacturing Company uses a job order cost system with manufacturing overhead applied to products on the basis of direct labor dollars. At the beginning of the most recent period, the company estimated its total direct labor cost to be $65,000 and its total manufacturing overhead cost to be $91,000.
Several incomplete general ledger accounts show the transactions that occurred during the most recent accounting period which is given in second requirement.

Finished Goods Inventory Cost of Goods Sold Beginning Balance Cost of Goods Completed Ending Balance 40,000 200,000 50,000 Unadjusted Cost of Goods Sold Adjusted Cost of Goods Sold 190,000 178,000 Sales Revenue Overhead 300,000 10,000 15,000 13,000 7,000 3,000 10,000 58,000 12,000 Applied Overhead Indirect Materials Indirect Labor Factory Depreciation Factory Rent Factory Utilities Other Factory Costs Actual Overhead Selling, General, and Administrative Expenses Adm. Salaries 28,000 20,000 15,000 63,000 Office Depreciation Ending Balance 3. Compute over-or underapplied overhead. g Overhead Overapplied by $ 12,000

Answer 1

A	B	C	D	E	F	G	H	I	J	K	L
2
3		Overhead rate	140%	=91000/65000
4
5		T-accounts
6		Raw materials inventory					Work in process Inventory
7		Beginning Balance	$15,000	$80,000	Raw materials used		Beginning Balance	$30,000	$200,000	Finished Goods
8		Purchases	$95,000				Direct Materials	$70,000
9		Ending Balance	$30,000				Direct Labor	$50,000
10							Applied Overhead	$70,000
11							Ending Balance	$20,000
12
13		Finished Goods Inventory					Cost of Goods Sold
14		Beginning Balance	$40,000	$190,000	Cost of goods sold		Unadjusted cost of goods sold	$190,000
15		Cost of goods completed	$200,000				Adjusted cost of goods sold	$200,000
16		Ending Balance	$50,000
17
18		Sales Revenue					Manufacturing Overhead
19				$300,000	Sales		Indirect Materials	$10,000	$70,000	Applied Overhead
20							Indirect Labor	$15,000
21							Factory Depreciation	$13,000
22							Factory Rent	$7,000
23		Selling, general and Administrative Expenses					Factory Utilities	$3,000
24		Admin. Salaries	$28,000	$190,000	Cost of goods sold		Other Factory Costs	$10,000
25		Office Depreciation	$20,000				Actual Overhead	$58,000
26		Advertising	$15,000
27		Ending Balance	$63,000
28
29		4)
30
31		Beginning Raw materials Inventory	$15,000	=D7
32		Plus: Raw materials Purchase	$95,000	=D8
33		Less: Indirect materials used	$10,000	=I19
34		Less: Ending Raw materials inventory	$30,000	=D9
35		Direct Materials used in production	$70,000	=D31+D32-D33-D34
36		Direct Labor	$50,000	=I9
37		Manufacturing Overhead	$70,000	=I10
38
39		Total current manufacturing cost	$190,000	=SUM(D35:D38)
40		Plus: Beginning work in process	$30,000	=I7
41		Total: Work in Process	$220,000	=D39+D40
42		Less: Ending Work in Process Inventory	$20,000	=I11
43		Cost of goods Manufactured	$200,000	=D41-D42
44		Beginning finished goods inventory	$40,000	=D14
45		Cost of goods available for sale	$240,000	=D43+D44
46		Ending finished goods inventory	$50,000	=D16
47		Unadjusted cost of goods sold	$190,000	=D45-D46
48		Less: Manufacturing cost overapplied	$12,000	=J19-I25
49
50		Adjusted cost of goods sold	$178,000	=D47-D48
51
52		5)
53
54		Income Statement
55		Sales Revenue	$300,000	=E19
56		Cost of Goods sold	$178,000	=D50
57		Gross Margin	$122,000	=D55-D56
58		Selling, general and Administrative Expenses	$63,000	=D27
59		Operating Income	$59,000	=D57-D58
60
61