Exercise
Chapter 2
(1) The Fine manufacturing company uses job
order costing system. The company uses machine hours to apply overhead cost to
jobs. At the beginning of 2012, the company estimated that 150,000 machine
hours would be worked and $900,000 overhead cost would be incurred during 2012.
The balances
of raw materials, work in process (WIP), and finished goods at the beginning of
2012 were as follows:
Raw
materials
|
$
|
40,000
|
Work in
process
|
30,000
|
|
Finished
goods
|
60,000
|
The Fine
manufacturing company recorded the following transactions during 2012:
a.
|
Raw
materials purchased on account, $820,000.
|
b.
|
Raw
materials were requisitioned for use in production, $760,000 ($720,000 direct
materials and $40,000 indirect materials).
|
c.
|
Direct
labor labor, $150,000; indirect labor, $220,000; sales commission, $180,000;
and administrative salaries, $400,000.
|
d.
|
Sales
travel costs were $34,000.
|
e.
|
Utility
costs incurred in the factory, $86,000.
|
f.
|
Advertising
expenses were $360,000.
|
g.
|
Depreciation
for the year was $700,000 ($560,000 relates to factory and $140,000 relates
to selling and administrative activities).
|
h.
|
Insurance
expired during the year, $20,000 ($14,000 relates to factory operations and
$6,000 relates to selling and administrative activities).
|
i.
|
Fine
manufacturing company worked 160,000 machine hours. Manufacturing overhead
was applied to production.
|
j.
|
Goods
costing $1,800,000 were completed during the year.
|
k.
|
The goods
costing $1,740,000 were sold to customers for $3,000,000.
|
Required:
Prepare
journal entries, T-accounts and income statement from the above information.
Prepare a
journal entry to close the balance in manufacturing overhead account (over or
under applied manufacturing overhead) to cost of goods sold.
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2) The Cambridge Company uses job order
costing. At the beginning of the May, two jobs were in process:
Job 369
|
Job372
|
||
Materials
|
$ 2,000
|
$ 700
|
|
Direct
labor
|
1,000
|
300
|
|
Applied
factory overhead
|
1,500
|
450
|
|
There was
no inventory of finished goods on May1. During the month, Jobs 373, 374, 375,
376, 378, and 379 were started.Materials
requisitions for May totaled $13,000, direct labor cost, $10,000, and actual
factory overhead, $16,000. Factory overhead is applied at a rate of 150% of
direct labor cost. The only job still in process at the end of May is No.
379, with costs of $1,400 for materials and $900 for direct labor. Job 376,
the only finished job on hand at the end of May, has a total cost of $2,000.
Required:
T accounts
for work in process, finished goods, cost of goods sold, factory overhead
control, and applied factory overhead.
General
journal entries to record:
a. Cost of goods manufactured b. Cost of goods sold c. Closing of over or underapplied factory overhead to cost of goods sold. |
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(3) Hogle Company is a manufacturing firm
that uses job order costing system. On January 1, the beginning of its fiscal
year, the company's inventory balances were as follows:
Raw materials
Work in process Finished Goods |
$20,000
$15,000 $30,000 |
The company
applies overhead cost to jobs on the basis of machine-hours worked. For the
current year, the company estimated that it would work 75,000 machine-hours and
incur $450,000 in manufacturing overhead cost. The following transactions were
recorded for the year
Raw materials
were purchased on account, $410,000.
Raw materials
were requisitioned for use in production, $380,000 ($360,000 direct materials
and $20,000 indirect materials).
The following
costs were incurred for employee services: direct labor, $75,000; indirect
labor, $110,000; sales commission, $90,000; and administrative salaries,
$20,000.
Sales travel
costs were $17,000.
Utility costs
in the factory were $43,000.
Advertising
costs were $180,000.
Depreciation
was recorded for the year, 350,000 (80% relates to factory operations, and 20%
relates to selling and administrative activities).
Insurance
expired during the year, $10,000 (70% relates to factory operations, and 30%
relates to selling and administrative activities).
Manufacturing
overhead was applied to production. Due to greater than expected demand for its
products, the company worked 80,000 machine-hours during the year.
Goods costing
$9,00,000 to manufacture according to their job cost sheets were completed
during the year.
Goods were
sold on account to customers during the year at a total selling price of
$1,500,000. The goods cost $870,000 to manufacture according to their job cost
sheets.
Required:
Prepare
journal entries to record the preceding transactions.
Post the
entries in (1) above to T-accounts (don't forget to enter the beginning
balances in the inventory accounts).
Is
manufacturing overhead underapplied or overapplied for the year? Prepare
journal entry to close any balance in the manufacturing overhead account to
cost of goods sold (COGS). Do not allocate the balance between ending
inventories and cost of goods sold (COGS).
Prepare an income statement for the year.
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