Question

In: Accounting

1. During the current month, Waterway Company incurs the following manufacturing costs. (a) Purchased raw materials...

1. During the current month, Waterway Company incurs the following manufacturing costs.

(a)		Purchased raw materials of $17,800 on account.
(b)		Incurred factory labor of $38,200.
(c)		Factory utilities of $3,800 are payable, prepaid factory property taxes of $2,810 have expired, and depreciation on the factory building is $9,800.

Record the company’s manufacturing costs in its job order costing system.

2. During January, its first month of operations, Ayayai Company accumulated the following manufacturing costs: raw materials purchased $4,100 on account, factory labor $6,100, and utilities payable $2,100.

Record the company’s manufacturing costs in its job order costing system.

3. Waterway Company estimates that annual manufacturing overhead costs will be $902,000. Estimated annual operating activity bases are direct labor cost $440,000, direct labor hours 50,000, and machine hours 110,000.

Compute the predetermined overhead rate for each activity base. (Round answers to 2 decimal places, e.g. 10.50.)

Overhead rate per direct labor cost	enter overhead rate per direct labor cost in percentages	%
Overhead rate per direct labor hour	$enter overhead rate per direct labor hour in dollars
Overhead rate per machine hour	$enter overhead rate per machine hour in dollars

Expert Solution

Question 1

S.No.	Particulars	Debit	Credit
(A)	Raw Materials Inventory A/C..Dr	17,800
	To Accounts Payables		17,800
	(Being Raw Materials purchased on Account)

(B)	Work in Process Inventory A/C...Dr	38,200
	To Factory Labour		38,200
	(Being Factory Labour Recorded)

(C)	Manufacturing Overhead A/C..Dr	16,410
	To Factory Utilities		3,800
	To Factory Property Taxes		2,810
	To Factory Building Depreciation		9,800
	(Being Manufacturing Overhead Recorded)

Question 2

S.No.	Particulars	Debit	Credit

(A)	Raw Materials Inventory A/C..Dr	4,100
	To Accounts Payables		4,100
	(Being Materials Purchased on Account Recorded)

(B)	Work in Process Inventory A/C..Dr	6,100
	To Factory Labour		6,100
	(Being Factory Labour Recorded)

(C)	Manufacturing Overhead A/C..Dr	2,100
	To Utilities Payable		2,100
	(Being Factory Utilities Recorded)

Question 3

Part A

Overhead Rate Based on Direct Labour Cost = Total Manufacturing Overhead / Direct Labour Cost * 100

Total Manufacturing Overheads = $ 902,000

Direct Labour Cost = $ 440,000

Predetermined Overhead Rate Based on Direct Labour Cost = 902,000 / 440,000 * 100

Predetermined Overhead Rate = 205% of Direct Labour Cost

Part B

Predetermined Overhead Rate based on Direct Labour Hours = Total Manufacturing Overhead / Total Direct Labour Hours

Total Manufacturing Overhead Cost = $ 902,000

Total Direct Labour Hours = 50,000 Hours

Predetermined Overhead Rate based on Direct Labour Hours = 902,000 / 50,000

Predetermined Overhead Rate = $ 18.04 per Direct Labour Hour

Part C

Predetermined Overhead Rate based on Machine Hours = Total Manufacturing Overhead Costs / Total Machine Hours

Total Manufacturing Overheads Costs = $ 902,000

Total Machine Hours = 110,000 Hours

Predetermined Overhead Rate = 902,000 / 110,000

Predetermined Overhead Rate = $ 8.2 per Machine Hour

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