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 $378,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year:
Direct labor (950 hours) | $ | 315,000 |
Indirect labor | $ | 107,000 |
Selling and administrative salaries | $ |
195,000 |
The balances in the inventory accounts at the beginning of the year were:
Raw Materials | $ | 47,000 |
Work in Process | $ | 38,000 |
Finished Goods | $ | 77,000 |
Required:
1. Prepare journal entries to record the preceding transactions.
2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.