Question

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):

1. $255,000 in raw materials were purchased
2. Direct materials were requisitioned for use in Job 1312, $55,000.
3. Direct materials were requisitioned for use in Job 1313, $80,000.
4. Headquarters incurred $35,000 in utility bills.
5. The factory incurred $15,000 in utility bills.
6. The record for Job 1311 indicated that 280 labor hours were used.
7. The record for Job 1312 indicated that 375 labor hours were used.
8. The record for Job 1313 indicated that 390 labor hours were used.
9. Jobs 1311 and 1312 were completed during the month.
10. Job 1310 and 1312 were sold during the month for $800,000.
11. Headquarters’ janitorial salaries for the month were $5,000.
12. The factory managers’ salaries totaled $160,000.
13. Indirect materials requisitioned totaled $35,000.
14. $100,000 of depreciation on the factory equipment was accrued this month.
15. Advertising costs for the month were $65,000.
16. -
17. Use MS Excel to show t-accounts or journal entries (your choice) to record the previous transactions. Also answer the following 5 questions in the spreadsheet. Then upload the file.

Answer 1

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