Question

In: Accounting

A. The Green Company makes boats from wood. Job 489 is to build 40 rowboats. Job...

A. The Green Company makes boats from wood. Job 489 is to build 40 rowboats.

Job 489 requires 1,000 pounds of wood costing $8 per pound. It requires 160 hours of direct labor costing $25 per hour. Also, use the following information about the company:

Total manufacturing overhead cost expected for all jobs during the whole year $400,000

Estimated direct labor hours for all jobs during the whole year 40,000

Calculate the following if the Green Company uses the traditional method of job order costing with one company-wide predetermined overhead rate using direct labor hours as the allocation base:

1. The predetermined overhead rate

2. The direct materials cost of job 489

3. The direct labor cost of job 489

4. The manufacturing overhead cost applied to job 489

5. The total cost of job 489

6. The cost per boat

Please make journal entries for the following transactions: of a manufacturing company:

B. The company purchased materials (both direct and indirect) on account (on credit) for $100,000

C. The company used $84,000 of direct materials.

D. The company used $7,000 of indirect materials.

E. The company incurred $50,000 of a liability (wages payable) for direct labor.

F. The company incurred $10,000 of a liability (wages payable) for indirect labor.

G. The company incurred $80,000 of manufacturing overhead, $15,000 of which was for depreciation on the factory machines and the rest was paid in cash.

H. The company allocated (applied) manufacturing overhead to various jobs using direct labor hours as the allocation base. The actual number of direct labor hours was 2,500 and the predetermined overhead rate was $34 per direct labor hour.

I. The cost of goods manufactured (finished) was $200,000.

J. Goods were sold on the account (on credit) for $400,000. The cost of the goods sold was $190,000.

(2 journal entries required for this one)

Assuming that a company’s total fixed cost is $7,000 and the variable cost per unit is $8, please calculate the following amounts if the company produces 4,000 units:

K. The total variable cost

L. The total cost

M. The average cost per unit

Solutions

Expert Solution

A.Total number of boats require to build for Job 489 = 40 boats

Total Pounds of woods required to build 40 boats = 1000 pound

                Cost of per pound of wood = $8

Total hours of Direct labour require to build 40 boats = 160 hours

Labour cost per hour = $25

Total Manufacturing overhead cost expected for all the jobs during the whole year = $400,000

Estimated direct labour hours for all jobs during the whole year = 40,000

Manufacturing cost per direct labour hours = Total Manufacturing overhead cost

                                                                                                Total Direct Labour Hours

                                                                                    =     $400,000/40,000

                                                                                        =     $10/hour

  1. Predetermined overhead rate =          $ 10/hour
  2. The Direct Material Cost =   Total Pounds of woods require * Cost per pound of wood                                                   = 1,000*8

        = $8,000

  1. The Direct Labour Cost = Total hours of Direct labour require* Labour cost per hour

= 160*25             

= $4,000

  1. The Manufacturing cost applied to Job 489:

Direct labour hours * Manufacturing cost per hour                                                                                 = 160*10

         = $1,600

  1. Total Cost for Job 489:

Direct Material:   $8,000        

Direct Labour:      $4,000                        

Manufacturing:   $1,600

Total Cost:           $13,600

  1. Cost Per boat : Total Cost/ Total Production

   : $13,600/40

   : $340/-

Journal Entries in the books of Manufacturing Company                                                                                                                                                                                                                              (Amount in $)

S.No

Particular

Debit

Credit

B.

Raw Material

To Accounts Payable

100,000

100,000

C.

Work In Progress

To Raw Material

84,000

84,000

D.

Manufacturing Overhead

To Raw Material

7,000

7,000

E.

Work In Progress

To Salaries and Wages Payable

50,000

50,000

F.

Manufacturing Overhead

To Salaries and Wages Payable

10,000

10,000

G.

Manufacturing Overhead

To Accumulated Depreciation

To Cash

80,000

15,000

65,000

H.

Work In Progress

To Manufacturing Overhead

(2,500*34)

85,000

85,000

I.

Finished Goods

To Work In Progress

200,000

200,000

J.1

Accounts Receivable

To Sales Revenue

400,000

400,000

J.2

Cost of Goods Sold

To Finished Goods

190,000

190,000

Company’s Total Fixed Cost: $7,000

Variable Cost per unit: $8

Total quantity produced: 4,000 Units

K. Total Variable Cost: Variable Cost per unit * total quantity produced

                                       :    8*4,000

                                       : $32,000

L. Total Cost: Variable Cost + Fixed Cost

                      : $32,000 + 4,000

                      : $36,000

M. Average cost per unit:   Total Cost/Units

                                            : $36,000/4000

                                            : $9


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