Question

Ralph Rover is a small company that manufactures special heavy equipment for use in under water oil fields. The line workers are specially trained and earn $30/hour. The company uses job order costing and applies manufacturing overhead on the basis of labor hours. At the beginning of the month, the following estimates were made: Estimated Manufacturing Overhead Costs - $330,000 Estimated Direct Labor Hours - 1,000 Beginning balances for inventory accounts were as follows: Raw Materials - $30,000 Work in Process - $261,000 Job 411 Finished Goods - $190,000 Job 410 The following transactions took place during the month (all purchases and services were acquired on account): $365,000 in raw materials were purchased Direct materials were requisitioned for use in Job 412, $80,000. Direct materials were requisitioned for use in Job 413, $70,000. The factory incurred $45,000 in utility bills. Headquarters incurred $15,000 in utility bills. The record for Job 412 indicated that 480 labor hours were used. The record for Job 413 indicated that 525 labor hours were used. Jobs 411, 412 and 413 were completed during the month. Job 410, 411 and 413 were sold during the month for $1,000,000. Advertising costs for the month were $85,000. Factory janitor salaries for the month were $5,000. The factory managers’ salaries totaled $150,000. Indirect materials requisitioned totaled $25,000. $120,000 of depreciation on the factory equipment was expensed this month. answer the following 8 questions in the spreadsheet. Then upload the file to question. How much overhead was allocated to job 412? What is the Cost of Goods Manufactured? What is the Cost of Goods Sold (before adjusting entries)? What is the period cost? How much product cost will show up on the final income statement? How much overhead was actually incurred this period? What is the net income for the period? What is the ending balance for the Finished Goods account?

Answer 1

Answer 1.
Predetermined Overhead Rate = $330,000 / 1,000 DLH
Predetermined Overhead Rate = $330 per DLH
Applied Factory Overhead - Job # 412 - 480 DLH X $330	158,400.00
Answer 2.
Cost of Goods Manufactured
Direct Material
Material Inventory, Beginning	30,000.00
Material Purchased	365,000.00
Total Direct Material Available for Prouction	395,000.00
Less: Material Inventory, Ending	(245,000.00)
Cost of Direct Materials Used in Productions		150,000.00
Direct Labor		30,150.00
Factory Overhead Applied - $330 X 1,005 hrs		331,650.00
Total Manufacturing Costs incurred in Dec		511,800.00
Add: WIP Inventory, Beginning		261,000.00
Total Manufacturing Cost		772,800.00
Less: WIP Inventory, Ending		-
Cost of Goods Manufactured		772,800.00
Answer 3.
Statement of Cost of Goods Sold
	On Company
Finished Goods Inventory, Beginning	190,000.00
Cost of Goods Manufactured	772,800.00
Cost of Goods Available for Sale	962,800.00
Less: Finished Goods Inventory, Ending	(252,800.00)
Cost of Goods Sold - Unadjusted	710,000.00
Answer 4.
Period Costs - Selling & Admn. Expenses
Utility Expense - Head Quarter	15,000.00
Advertising Costs	85,000.00
Total Period Cost	100,000.00
Answer 5.
Total Product Cost:
Cost of Goods Sold - Unadjusted	710,000.00
Underapplied Overhead	13,350.00
Total Product Cost	723,350.00
Actual Factory Overhead
Utility Expense	45,000.00
Factory Janitor Sales	5,000.00
Factory Managers' Salary	150,000.00
Indirect Material	25,000.00
Depreciation - Factory Equipment	120,000.00
Total Actual Factory Overhead	345,000.00
Total Actual Factory Overhead	345,000.00
Applied Factory Overhead - 1,005 DLH X $330	331,650.00
Underapplied Overhead	13,350.00
Answer 6.
Actual Factory Overhead
Utility Expense	45,000.00
Factory Janitor Sales	5,000.00
Factory Managers' Salary	150,000.00
Indirect Material	25,000.00
Depreciation - Factory Equipment	120,000.00
Total Actual Factory Overhead	345,000.00
Answer 7.
Income Statement
	Amount
Sales	1,000,000.00
Less: Cost of Goods Sold - Adjusted	(723,350.00)
Gross Profit	276,650.00
Less: Selling & Admn. Expense	(100,000.00)
Net Income	176,650.00
Answer 8.
Finished Goods Inventory - Job # 412	252,800.00