Question

Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $399,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year: Raw materials purchased on account, $280,000. Raw materials used in production (all direct materials), $265,000. Utility bills incurred on account, $75,000 (80% related to factory operations, and the remainder related to selling and administrative activities). Accrued salary and wage costs: Direct labor (1,100 hours) $ 310,000 Indirect labor $ 106,000 Selling and administrative salaries $ 190,000 Maintenance costs incurred on account in the factory, $70,000 Advertising costs incurred on account, $152,000. Depreciation was recorded for the year, $88,000 (85% related to factory equipment, and the remainder related to selling and administrative equipment). Rental cost incurred on account, $113,000 (90% related to factory facilities, and the remainder related to selling and administrative facilities). Manufacturing overhead cost was applied to jobs, $ ? . Cost of goods manufactured for the year, $930,000. Sales for the year (all on account) totaled $2,000,000. These goods cost $960,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: Raw Materials $ 46,000 Work in Process $ 37,000 Finished Goods $ 76,000 Required: 1. Prepare journal entries to record the preceding transactions. 2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.) 3. Prepare a schedule of cost of goods manufactured. 4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 4B. Prepare a schedule of cost of goods sold. 5. Prepare an income statement for the year. Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $399,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year: Raw materials purchased on account, $280,000. Raw materials used in production (all direct materials), $265,000. Utility bills incurred on account, $75,000 (80% related to factory operations, and the remainder related to selling and administrative activities). Accrued salary and wage costs: Direct labor (1,100 hours) $ 310,000 Indirect labor $ 106,000 Selling and administrative salaries $ 190,000 Maintenance costs incurred on account in the factory, $70,000 Advertising costs incurred on account, $152,000. Depreciation was recorded for the year, $88,000 (85% related to factory equipment, and the remainder related to selling and administrative equipment). Rental cost incurred on account, $113,000 (90% related to factory facilities, and the remainder related to selling and administrative facilities). Manufacturing overhead cost was applied to jobs, $ ? . Cost of goods manufactured for the year, $930,000. Sales for the year (all on account) totaled $2,000,000. These goods cost $960,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: Raw Materials $ 46,000 Work in Process $ 37,000 Finished Goods $ 76,000 Required: 1. Prepare journal entries to record the preceding transactions. 2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.) 3. Prepare a schedule of cost of goods manufactured. 4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 4B. Prepare a schedule of cost of goods sold. 5. Prepare an income statement for the year.

Answer 1

answer to Q4A)

DR Manufacturing overhead 5,500

CR Cost of goods sold 5,500