Question

A-1 Furniture Manufacturing produces recliners. In June, the two production departments have budgeted allocation bases of 5000 machine hours in department 1 and 10,000 direct manufacturing labor hours in department 2. The budgeted manufacturing overhead for June was $70,000 for Dept. 1 and $60,000 for Dept. 2. For Job A, the actual costs incurred in the two departments were as follows:

Dept. 1                                Dept. 2

Direct materials purchased on account$120,000$180,000

Direct materials used34,000 15,000

Direct manufacturing labor54,00055,000

Indirect manufacturing labor12,00010,000

Indirect materials used7,000 5,000

Equipment lease15,0005,000

Plant utilities2,0001,000

Job A incurred 900 machine hours in Dept. 1 and 400 manufacturing labor hours in Dept. 2.The company uses a budgeted overhead rate for applying overhead to production.

a)Determine the budgeted manufacturing overhead rate for each department.

b)Prepare the necessary journal entries to summarize the June transactions for Dept. 1.

Answer 1

a)

Budgeted manufacturing overhead rate = Budgeted manufacturing overhead / Mchine Hours

Budgeted manufacturing overhead	$        70,000
Mchine Hours	5000
Budgeted manufacturing overhead rate	$          14.00

b) Journal Entries:

J No.	Account Description	Debit	Credit
1	Material Inventory	$ 120,000
	Accounts Payable		$ 120,000
	(To record purchase of Inventory)
2	WIP - Job A	$    34,000
	Material Inventory		$    34,000
	(To record issue of Inventory)
3	WIP - Job A	$    54,000
	Wages Expesnes		$    54,000
	(To record wages charge to WIP)
4	Manufactring Overhead	$    36,000
	Wages Expesnes		$    12,000
	Material Inventory		$      7,000
	Lease Expesnes		$    15,000
	Utility Expenses		$      2,000
	(To record Manufacturing Expenses)
4	WIP - Job A (14*900)	$    12,600
	Manufactring Overhead		$    12,600
	(To record OH application to WIP)

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