Question

Lamonda Corp. uses a job order cost system. On April 1, the accounts had balances as shown in the T-accounts below:

The following transactions occurred during April:

(a) Purchased materials on account at a cost of $231,770.
(b) Requisitioned materials at a cost of $111,600, of which $16,800 was for general factory use.
(c) Recorded factory labor of $224,200, of which $42,575 was indirect.
(d) Incurred other costs:

Selling expense	$	35,200
Factory utilities		23,900
Administrative expenses		51,050
Factory rent		11,400
Factory depreciation		19,400

(e) Applied overhead at a rate equal to 141 percent of direct labor cost.
(f) Completed jobs costing $262,650.
(g) Sold jobs costing $324,270.
(h) Recorded sales revenue of $512,000.

Required:
1. & 2. Post the April transactions to the T-accounts and compute the balance in the accounts at the end of April. (Round your answers to 2 decimal places.)



3-a. Compute over- or underapplied manufacturing overhead. (Round your answer to 2 decimal places.)



3-b. If the balance in the Manufacturing Overhead account is closed directly to Cost of Goods Sold, will Cost of Goods Sold increase or decrease?

	Increase
	Decrease

4. Prepare Lamonda’s cost of goods manufactured report for April. (Round your answers to 2 decimal places.)



5. Prepare Lamonda’s April income statement. Include any adjustment to Cost of Goods Sold needed to dispose of over- or underapplied manufacturing overhead. (Round your answers to 2 decimal places.)

Answer 1

Answer 3-a
Computation of over or under applied manufacturing overheads
Applied manufacturing overheads = Direct labour cost * Overhead rate = [$224200 - $42575] * 141% = $2,56,091.25
Actual Manufacturing overheads incurred is as under,
Indirect Material		$16,800.00
Indirect Labour		$42,575.00
Factory Utilities		$23,900.00
Factory Rent		$11,400.00
Factory Depreciation		$19,400.00
Actual Manufacturing overheads incurred =		$114,075.00
Overapplied manufacturing overheads = Applied overheads - Actual overheads incurred = $2,56,091.25 - $1,14,075 = $1,42,016.25
Answer 3-b
If the balance in the Manufacturing Overhead account is closed directly to Cost of Goods Sold,
then the cost of goods sold would decrease.
Answer 4
Lamonda
Cost of goods manufactured report for April
Direct Material		$94,800.00
Direct Labour		$181,625.00
Manufacturing Overheads applied		$256,091.25
Cost of manufacturing for April		$532,516.25
Less : Work In process ,April end		$269,866.25
Cost of Goods Manufactured		$262,650.00
Answer 5
Lamonda
Income Statement for the April
Sales			$512,000.00
Cost of goods sold		$324,270.00
Less : Adh.for Overapplied overheads		$142,016.25
Cost of goods sold (adjusted)			$182,253.75
Gross Margin			$329,746.25
Less : Operating Expenses
Selling Expenses		$35,200.00
Administrative Expenses		$51,050.00
Total Operating Expenses			$86,250.00
Operating Income			$243,496.25