Question

In: Accounting

Office Works has an order to manufacture several specialty products. The beginning cash and equity balances...

Office Works has an order to manufacture several specialty products. The beginning cash and equity balances were $105,000. All other beginning balances were $0. Use your T-Account worksheet to record the following transactions:

Purchased $50,000 of direct materials on account.
Used $45,000 direct materials in production during the month.
Manufacturing employees worked 6,400 hours and were paid at a rate of $8 per hour. Paid cash for the direct labor expense.

The company applies OH based on direct labor cost. This year's annual overhead is estimated to be $500,000. The actual direct labor cost last year was $1,250,000. The company estimates it will spend $625,000 in labor cost this year.
Compute and record the OH applied to the job.
Completed units costing $50,000 during the month.
Sold 6,000 units costing $6.50 during the month. The selling price is 30% above cost. Received cash.
This year, the company paid $40,000 cash for actual OH expenses incurred. Last year the company paid $65,000 cash for OH expenses. Record the actual OH costs.
The company considers OH differences less than $4,000 to be immaterial. By how much was OH over applied or under applied? Record the difference.

Now, CHOOSE 6 CORRECT STATEMENTS from the choices below. You should have 6 check marks indicating your answer choices. Each answer choice is worth 4 points:

1. The predetermined overhead rate is?
2. The direct labor that is debited to labor expense is?
3. How much are the total current manufacturing costs?
4. How much revenue did the company earn?
5. By how much was MOH over/under applied?
6. How much are the costs of goods manufactured?

Group of answer choices

The cost of goods manufactured is $39,000

The amount of sales revenue earned was $50,700

The direct labor that will be debited to direct labor expense is $0

The predetermined MOH rate is $..75

The total current manufacturing costs are $137,160

The predetermined MOH rate is $.80

The cost of goods manufactured is $40,000

The direct labor that will be debited to direct labor expense is $40,960

The amount of over/under applied MOH is $1,000

The direct labor that will be debited to direct labor expense is $51,200

The amount of over/under applied MOH is $0

The direct labor that will be debited to direct labor expense is $160,137

The amount of sales revenue earned was $50,000

The direct labor that will be debited to direct labor expense is $160,200

The amount of over/under applied MOH is $960

The cost of goods manufactured is $50,000

The predetermined MOH rate is $1.25

The amount of sales revenue earned was $39,000

Solutions

Expert Solution

Recording of overhead applied to Job:
	Debit $	Credit $
Work in Process	40960		51200*0.8
Manufacturing Overhead		40960

Over-applied = Applied - Actual = 40960 - 40000 = $960 < $4000, so immaterial

1) Pre-determined overhead rate = Estimated OH / Estimated base (DL Costs)

$500000 / $625000 = $0.80 per dollar of DL cost

The predetermined MOH rate is $.80

2) Direct labor debited to labor expense =

6400 * 8 = $51200

The direct labor that will be debited to direct labor expense is $51,200

3) total Current manufacturing cost= DM+DL+M o/h =

45000 + 51200 + 51200*0.8 = 137160

The total current manufacturing costs are $137,160

4)Revenue the company earn = (6000 * 6.5)* 1.30 = $50700

The amount of sales revenue earned was $50,700

5) The amount of over/under applied MOH is $960

Applied OH =51200*0.8 = 40960

Actual OH = 40000

Overhead applied OH = $960

Being less than $4000, so immaterial

6) The costs of goods manufactured = Completed units costs = $50000

The cost of goods manufactured is $50,000

ekkarill92 answered 2 years ago

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