Question

Scholastic Brass Corporation manufactures brass musical instruments for use by high school students. The company uses a normal costing system, in which manufacturing overhead is applied on the basis of direct-labor hours. The company’s budget for the current year included the following predictions.

Budgeted total manufacturing overhead ..........................................................................................................$426,300

Budgeted total direct-labor hours (based on practical capacity) .....................................................................20,300

During March, the firm worked on the following two production jobs: Job number T81, consisting of 76 trombones Job number C40, consisting of 110 cornetsThe events of March are described as follows:

a. One thousand square feet of rolled brass sheet metal were purchased on account for $5,000.

b. Four hundred pounds of brass tubing were purchased on account for $4,000.

c. The following requisitions were submitted on March 5: Direct labor: Job number T81, 800 hours at $20 per hour Direct labor: Job number C40, 900 hours at $20 per hour Indirect labor: General factory cleanup, $4,000 Indirect labor: Factory supervisory salaries, $9,000 Requisition number 112: 250 square feet of brass sheet metal at $5 per square foot (for job number T81) Requisition number 113: 1,000 pounds of brass tubing, at $10 per pound (for job number C40) Requisition number 114: 10 gallons of valve lubricant, at $10 per gallonAll brass used in production is treated as direct material. Valve lubricant is an indirect material.

d. An analysis of labor time cards revealed the following labor usage for March.

Direct labor: Job number T81, 800 hours at $20 per hour

Direct labor: Job number C40, 900 hours at $20 per hour Indirect labor:

General factory cleanup, $4,000 Indirect labor:

Factory supervisory salaries, $9,000

e. Depreciation of the factory building and equipment during March amounted to $12,000.

f. Rent paid in cash for warehouse space used during March was $1,200.

g. Utility costs incurred during March amounted to $2,100. The invoices for these costs were received, but the bills were not paid in March.

h. March property taxes on the factory were paid in cash, $2,400.

i. The insurance cost covering factory operations for the month of March was $3,100. The insurance policy had been prepaid.

j. The costs of salaries and fringe benefits for sales and administrative personnel paid in cash during March amounted to $8,000.

k. Depreciation on administrative office equipment and space amounted to $4,000.

l. Other selling and administrative expenses paid in cash during March amounted to $1,000.

m. Job number T81 was completed on March 20.

n. Half of the trombones in job number T81 were sold on account during March for $700 each.

The March 1 balances in selected accounts are as follows:

Cash ...................................................................................................................................................................$?? 10,000

Accounts Receivable .........................................................................................................................................21,000

Prepaid Insurance .............................................................................................................................................5,000

Raw-Material Inventory .....................................................................................................................................149,000

Manufacturing Supplies Inventory ....................................................................................................................500

Work-in-Process Inventory ................................................................................................................................91,000

Finished-Goods Inventory .................................................................................................................................220,000

Accumulated Depreciation: Buildings and Equipment .....................................................................................102,000

Accounts Payable ..............................................................................................................................................13,000

Wages Payable ..................................................................................................................................................8,000

Required:

1. Calculate the company’s predetermined overhead rate for the year.

2. Prepare journal entries to record the events of March.

3. Set up T-accounts, and post the journal entries made in requirement (2).

4. Calculate the overapplied or underapplied overhead for March. Prepare a journal entry to close this balance into Cost of Goods Sold.

5. Prepare a schedule of cost of goods manufactured for March.

6. Prepare a schedule of cost of goods sold for March.

7. Prepare an income statement for March.

Answer 1

	ans 1
		Predetermined rate	21
		426300/20300
	Job cost sheet		T81	C40	Total
		Direct Materials	1,250	10,000	11,250
			(250*5)	(1000*10)
		Direct Labor D	16,000	18,000	34,000
			(800*20)	(900*20)
		Applied overhead	16800	18900	35,700
			(800*21)	(900*21)
		Total costs added in April T	34,050	46,900
		Total costs (April 30) B+T	$34,050	$46,900
		Status on April 30
		April 30 cost included in:
	Transa	Accounst Title	Dr	Cr
	a	Raw Material Inventory	5000
		Accounts payable		5000
	b)	Raw Material Inventory	4000
		Accounts payable		4000
	c)	Work in Process Inventory	11,250
		Factory Overhead   (10*10)	100
		Raw Material Inventory		11,350
	d)	Work in Process Inventory	34,000
		Factory Overhead (4000+9000)	13000
		Wages payable		47,000
		Work in Process Inventory	35,700
		Factory Overhead		35,700
	e	Factory Overhead	12,000
		Accumulated depreciation-Factory equipment		12,000
	f	Factory Overhead	1200
		Cash		1200
	g	Factory Overhead	2,100
		Accounts payable		2,100
	h	Factory Overhead	2400
		Cash		2400
	i	Factory Overhead	3100
		Prepaid Insurance		3100
	j	Salaries expenses	8000
		Cash		8000
	k	Depreciation expenses	$4,000
		Accumulated depreciation-Office equipment		$4,000
	l	Other selling and administrative expenses	1000
		Cash		1000
	m	Finished Goods Inventory (the beginning bal of T81+34050)	$34,050
		Work in Process Inventory		$34,050
	n	Accounts Receivable	26600
		Sales (76*1/2*700)		26600
		Cost of good sold (34050*1/2)+(beg bal of T81*1/2)	17025
		Finished Goods Inventory		17025
		T account
		Factory Overhead
		c)	100	Applied	35,700
		d)	13000
		e)	12,000
		f)	1200
		g)	2,100
		h)	2,100
		i)	3100
		Ending balance	2,100
		Overapplied by $2100
				Dr	Cr
	ans 4	Factory overhead		2100
		Cost of good sold			2100
As work in process inventory balance detail not given hence total job cost cant be calculated.
Apart from that all entries are made. If any doubt please comment