In: Accounting
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:
Direct labor (975 hours) | $ | 230,000 |
Indirect labor | $ | 90,000 |
Selling and administrative salaries | $ | 110,000 |
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
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.