Question

Ralph Rover is a small company that manufactures special heavy equipment for use in under water oil fields. The line workers are specially trained and earn $35/hour. The company uses job order costing and applies manufacturing overhead on the basis of labor hours. At the beginning of the month, the following estimates were made:

Estimated Manufacturing Overhead Costs -              $360,000

Estimated Direct Labor Hours -                                          900

Beginning balances for inventory accounts were as follows:

            Raw Materials -                                  $30,000

            Work in Process -                               $61,000 Job 411

            Finished Goods -                                 $290,000 Job 410

The following transactions took place during the month (all purchases and services were acquired on account):

1. $355,000 in raw materials were purchased
2. Direct materials were requisitioned for use in Job 412, $60,000.
3. Direct materials were requisitioned for use in Job 413, $90,000.
4. The factory incurred $45,000 in utility bills.
5. Headquarters incurred $15,000 in utility bills.
6. The record for Job 411 indicated that 200 labor hours were used.
7. The record for Job 412 indicated that 335 labor hours were used.
8. The record for Job 413 indicated that 390 labor hours were used.
9. Jobs 411, 412 and 413 were completed during the month.
10. Job 410, 411 and 413 were sold during the month for $1,100,000.
11. Factory janitor salaries for the month were $5,000.
12. The factory managers’ salaries totaled $160,000.
13. Indirect materials requisitioned totaled $35,000.
14. $100,000 of depreciation on the factory equipment was accrued this month.
15. Advertising costs for the month were $85,000.

Use MS Excel to show t-accounts or journal entries (your choice) to record the previous transactions. Also answer the following 8 questions in the spreadsheet. Then upload the file to question.

1. How much overhead was allocated to job 412? __________________________
2. What is the Cost of Goods Manufactured? _______________________________
3. What is the Cost of Goods Sold (before adjusting entries)? ____________________
4. What is the period cost? ____________________________
5. How much product cost will show up on the final income statement? __________
6. How much overhead was actually incurred this period?___________________________
7. What is the net income for the period? _________________________________
8. What is the ending balance for the Finished Goods account? ________________

Answer 1

Answer;-

Raw Materials				Work in Process
Beg. Bal.	30000			Beg. Bal .	61000	613375	9
1	355000	60000	2	2	60000
		90000	3	3	90000
		35000	13	6	7000
End. Bal.	200000			7	11725
				8	13650
					370000
				End. Bal.	0
Finished Goods				Manufacturing Overheads
Beg. Bal.	290000	697650	10	4	45000	370000
9	613375			11	5000
				12	160000
End. Bal.	205725			13	35000
				14	100000
Cost of Goods Sold				Utility Expense
10	697650			5	15000
Advertising Expense				Sales Revenue
15	85000					1100000	10

Predetermined overhead rate = Estimated manufacturing overhead costs/Estimated direct labor hours = $360000/900 = $400 per direct labor hour

	Job			Total $
	411	412	413
Beginning balance	61000	0	0	61000
Direct materials	0	60000	90000	150000
Direct labor	7000	11725	13650	32375
Factory overhead	80000	134000	156000	370000
Total cost $	148000	205725	259650	613375
Status	COGS	FG	COGS

1. 335 x $400 = $134000

2. Job 411 + Job 412 + Job 413 = $148000 + $205725 + $259650 = $613375

3. Job 410 + Job 411 + Job 413 = $290000 + $148000 + $259650 = $697650

4. Utility expense + Advertising expense = $15000 + $85000 = $100000

5. Adjusted cost of goods sold = $697650 - $25000 = $672650

6. $345000

7. Net income = Sales revenue - Cost of goods sold + Overapplied overhead - Utility expense - Advertising expense = $1100000 - $697650 + $25000 - $15000 - $85000 = $327350

Overapplied overhead = Overhead Applied - Overhead incurred = $370000 - $345000 = $25000

8. Job 412 $205725

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