Question

In: Accounting

Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for...

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 $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year:

  1. Raw materials purchased on account, $200,000.
  2. Raw materials used in production (all direct materials), $185,000.
  3. Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
  4. Accrued salary and wage costs:
Direct labor (975 hours) $ 230,000
Indirect labor $ 90,000
Selling and administrative salaries $ 110,000
  1. Maintenance costs incurred on account in the factory, $54,000.
  2. Advertising costs incurred on account, $136,000.
  3. Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
  4. Rental cost incurred on account, $120,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).
  5. Manufacturing overhead cost was applied to jobs, $ ? .
  6. Cost of goods manufactured for the year, $770,000.
  7. Sales for the year (all on account) totaled $1,200,000. These goods cost $800,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

Raw Materials $ 30,000
Work in Process $ 21,000
Finished Goods $ 60,000

Required:

Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)

Accounts Receivable

Sales

Raw Materials

Cost of Goods Sold

Work in Process

Manufacturing Overhead

Finished Goods

Advertising Expense

Accumulated Depreciation

Utilities Expense

Accounts Payable

Salaries Expense

Depreciation Expense

Salaries & Wages Payable

Rent Expense

Solutions

Expert Solution

Accounts Receivable Sales
Beg. Bal. Beg. Bal.
k(1) 1200000 1200000 k(1)
End. Bal. 1200000 End. Bal. 1200000
Raw Materials Cost of Goods Sold
Beg. Bal. $30000 Beg. Bal.
a. 200000 185000 b. k(2) 800000
End. Bal. $45000 End. Bal. $800000
Work in Process Manufacturing Overhead
Beg. Bal. $21000 Beg. Bal.
b. 185000 770000 j. c. 63000 390000 i.
d. 230000 d. 90000
i. 390000 e. 54000
g. 76000
End. Bal. $56000 h. 102000
End. Bal. 5000
Finished Goods Advertising Expense
Beg. Bal. $60000 Beg. Bal.
j. 770000 800000 k(2) f. 136000
End. Bal. $30000 End. Bal. 136000
Accumulated Depreciation Utilities Expense
Beg. Bal. Beg. Bal.
95000 g. c. 7000
End. Bal. 95000 End. Bal. 7000
Accounts Payable Salaries Expense
Beg. Bal. Beg. Bal.
200000 a. d. 110000
70000 c.
54000 e. End. Bal 110000
136000 f. .
120000 h.
End. Bal. 580000
Depreciation Expense Salaries & Wages Payable
Beg. Bal. Beg. Bal.
g. 19000 430000 d.
End. Bal. 19000 End. Bal. 430000
Rent Expense
Beg. Bal.
h. 18000
End. Bal. $18000

Predetermined overhead rate= Estimated manufacturing overhead/Estimated direct labor hours

= $360000/900= $400 per direct labor hour

Manufacturing overhead applied= $400*975= $390000

NOTE:- For any problem regarding the answer please ask in the comment section.


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