In: Accounting
Riverwards Inc. is a small company that manufactures irrigation systems. The line workers earn $32/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 - $261,000
Estimated Direct Labor Hours - 900
Beginning balances for inventory accounts were as follows:
Raw Materials - $30,000
Work in Process - $41,000 Job 1311
Finished Goods - $150,000 Job 1310
The following transactions took place during the month (all purchases and services were acquired on account):
Predetermined overhead rate = $ 261,000 / 900 = $ 290 per DLH
In the books of Riverwards Inc. :
Transaction / Event | Account Titles | Debit | Credit |
$ | $ | ||
1. | Raw Materials | 255,000 | |
Accounts Payable | 255,000 | ||
2. | Work in Process: 1312 | 55,000 | |
Work in Process:1313 | 80,000 | ||
Raw Materials | 135,000 | ||
3. | Utilities Expense | 35,000 | |
Accounts Payable | 35,000 | ||
4. | Factory Overhead | 15,000 | |
Accounts Payable | 15,000 | ||
5. | Work in Process: 1311 ( 280 DLH @ $ 32) | 8,960 | |
Work in Process: 1312 ( 375 DLH @ $ 32 ) | 12,000 | ||
Work in Process: 1313 ( 390 DLH @ $ 32) | 12,480 | ||
Factory Wages Payable | 33,440 | ||
6. | Work in Process: 1311 ( 290 x 280 DLH ) | 81,200 | |
Work in Process: 1312 ( 290 x 375 DLH) | 108,750 | ||
Work in Process: 1313 ( 290 x 390 DLH ) | 113,100 | ||
Factory Overhead | 303,050 | ||
7. | Finished Goods Inventory | 306,910 | |
Work in Process: 1311 | 131,160 | ||
Work in Process: 1312 | 175,750 | ||
8. | Accounts Receivable | 800,000 | |
Sales | 800,000 | ||
9. | Cost of Goods Sold ( 150,000 + 175,750) | 325,750 | |
Finished Goods | 325,750 | ||
10. | Salaries and Wages Expense | 5,000 | |
Salaries and Wages Payable | 5,000 | ||
11. | Factory Overhead | 160,000 | |
Salaries and Wages Payable | 160,000 | ||
12. | Factory Overhead | 35,000 | |
Raw Materials | 35,000 | ||
13. | Factory Overhead | 100,000 | |
Accumulated Depreciation: Equipment | 100,000 | ||
14. | Advertising Expense | 65,000 | |
Accounts Payable | 65,000 |