Question

Polo Manufacturing Company has two jobs in the process – Job 10 and Job 11. Job Cost Sheets are placed on the Answers Sheets. Company applies factory overhead using activity based costing. The predetermined overhead rates for activities are as follows:

                                                                                          Machine Setup Activity                      Inspection Activity

Overhead Rate                                                                 $120 per machine setup                    $75 per inspection   

On the space provided on the answer sheet, provide journal entries for the following transactions. Complete Job Cost Sheets as needed. If you wish, you may abbreviate account names. Example: A/P or A/R, CGS, etc.

1. Purchased $30,000 of materials – paid $5,000 in cash and the rest was on account.

2. Paid $1,200 for insurance premium of which $800 was related to factory.

3. Materials were requested and transferred to factory in the following sequence:

                                                      Material Cost

Job 10                                            $9,000

Job 11                                            12,000

Indirect Materials                             3,500        

4. Paid employee salaries and wages as follow:

Manufacturing:     

Job No. 10                               $ 6,000    

Job No. 11                               $ 8,000    

Indirect labor                            $ 2,000

Administration                          $ 4,000

Marketing                                 $ 6,000

5. Company applied factory overhead cost to the jobs based on the following information:

Job Number                                             Job #10                         Job #11    

Machine setup required                                6                                   8    

# of inspection required                               10                                   15

6. Job No. 10 was completed and transferred to warehouse.

7. Delivered Job 10 to customer and collected for.   Sales price was “Cost + 120% of Cost” plus 8% sales taxes.  

8. At the end of year, Factory Overhead, Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold had the following balances. Provide the journal entry to adjust the appropriate accounts.

                                                                FOH

40000

34000

                                                                WIP

12000

                                                     FG INVENTORY

80000

                                         COST OF GOODS SOLD

200000

9. Recoded $7,000 depreciation on equipment of which $4,000 was pertaining to factory.

10. Paid $4,500 for utilities of which $3,000 was pertaining to factory.     

Answer 1