Question

Dream Makers is a small manufacturer of gold and platinum jewelry. It uses a job costing system that applies overhead on the basis of direct labor hours. Budgeted factory overhead for the year was $465,800, and management budgeted 34,000 direct labor-hours. The company had no Materials, Work-in-Process, or Finished Goods Inventory at the beginning of April. These transactions were recorded during April:

1. April insurance cost for the manufacturing property and equipment was $1,850. The premium had been paid in January.
2. Recorded $1,060 depreciation on an administrative asset.
3. Purchased 21 pounds of high-grade polishing materials at $16 per pound (indirect materials). The purchase was on credit.
4. Paid factory utility bill, $6,550, in cash.
5. Incurred 4,000 hours and paid payroll costs of $160,000. Of this amount, 1,000 hours and $20,000 were indirect labor costs.
6. Incurred and paid other factory overhead costs, $6,300.
7. Purchased $25,000 of materials. Direct materials included unpolished semiprecious stones and gold. Indirect materials included supplies and polishing materials. The purchase was on credit.
8. Requisitioned $19,000 of direct materials and $1,700 of indirect materials from Materials Inventory.
9. Incurred and paid miscellaneous selling and administrative expenses, $5,800.
10. Incurred $3,610 depreciation on manufacturing equipment for April.
11. Paid advertising expenses in cash, $2,725.
12. Applied factory overhead to production on the basis of direct labor hours.
13. Completed goods costing $64,500 during the month.
14. Made sales on account in April, $57,620. The Cost of Goods Sold was $48,700.

Required:

Prepare a schedule of Cost of Goods Manufactured and a schedule of Cost of Goods Sold.

Prepare the income statement for April.

Prepare a schedule of Cost of Goods Manufactured.

Dream Makers Statement of Cost of Goods Manufactured For the Month Ended April 30 Direct materials used $19,000 Direct labor 140,000 Factory overhead applied 41,100 Total manufacturing costs incurred during year 200,100 Add: Work-in-process inventory, Beginning 0 Total manufacturing costs to account for 200,100 Less: Work-in-process inventory, Ending $135,600 Cost of goods manufactured $64,500 Actual overhead Depreciation expense--plant $3,610 Other factory overhead - Factory insurance - Factory utilities - Indirect labor - Indirect materials used - - - Total factory overhead - Total applied overhead - Overapplied overhead -

Answer 1

Pre-determined Oh rate
estimated overheads			465800
Divide: Estimated Mh			34000
Pre-determined Oh rate			13.7
Statement of Cost of goods Manufactured
Direct Material cost				19000
Direct Labour cost				140000
Overheads applied (3000*13.70)				41100
Total Manufacturing cost				200100
Add: Beginning inventory of Wip				0
Total cost of work in process				200100
Less: Endding inventory of WIP				135600
	(200100-64500)
Cost of goods manufactured				64500
Actual Overheads:
Depreciation-Plant			3610
Other factory overheads			6300
Factory insurance			1850
Factory utilities			6550
Indirect labour			20000
Indirect material			2036
(21 pounds @ 16+1700)
Total Overheads incurred			40346
Overheads applied			41100
Over-applied overheads			754
Statement of cost of goods sold:
Beginning inventory of FG				0
Add: Cost of goods manufactured				64500
Cost of goods available for sales				64500
Less: Ending inventory of FG				15800
	(64500-48700)
Unadjusted cost of goods sold				48700
Less: Over-applied Overheads				754
Adjusted cost of goods sold				47946
Income Statement:
Sales revenue				57620
Less: Adjusted cost of goods sold				47946
Gross margin				9674
Less: Operatinng expenses
Depreciation			1060
Misc xpenses			5800
Advertisement expenses			2725
Total Operating expenses				9585
Net Income				89