Question

The Brass Works is in the process of determining manufacturing overhead. Journalize events (a) - (d) to Factory Overhead, Administrative Expenses, Selling Expenses, or allocated between the three as appropriate. The insurance policy and electric bill were paid in cash at the time of acquisition. Next calculate the overhead application rate and apply overhead to Work in Process.

a. Brass Works purchases an insurance policy for $4,000. It is computed that 80% of the value of the policy protects production, the balance protects the administrative offices. Brass Works charges insurance initially to expense. If an amount box does not require an entry, leave it blank.

b. The electric bill is received showing an amount due of $1,200. This meter is utilized only by production as the office spaces have their own meter.

c. Payroll reports that the sales manager's salary for the period is $3,500 and that production supervisors wages for the period are $5,500. If an amount box does not require an entry, leave it blank.

d. The stockroom reports that $2,575 in materials were purchased for the production maintenance department.

e. If the driver for the application of overhead is drop-forge strokes and there are expected to be 1,000 strokes in this period, what is the rate per stroke? Round your answer to three decimal places.
$ per stroke.

f. Assuming that there are 1,150 drop-forge strokes in this period, apply factory overhead to Work in Process. Use the rate calculated in part (e). Round your answer to the nearest dollar.

Answer 1

Transaction	Account Titles and Explanation	Debit	Credit
a.	Factory overhead ($4000 x 80%)	3200
	Administrative expenses	800
	Cash		4000
	(To record payment of insurance costs)
b.	Factory overhead	1200
	Cash		1200
	(To record payment of factory electric bill)
c.	Factory overhead	5500
	Selling expenses	3500
	Salaries and wages payable		9000
	(To record payroll expense)
d.	Factory overhead	2575
	Accounts payable		2575
	(To record cost of production maintenance materials)

e. Overhead rate = $12475/1000 = $12.475 per stroke

Transaction	Account Titles and Explanation	Debit	Credit
f.	Work in process (1150 x $12.475)	14346
	Factory overhead		14346
	(To record application of factory overhead)