Question

Donation Company produces gadgets for the coveted small appliance market. The following data reflect activity for the year 2014​: LOADING...​(Click the icon to view the​ data.) Donation Co. uses a​ normal-costing system and allocates overhead to work in process at a rate of $2.80 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no inventory account for indirect materials.

Costs incurred:
Purchases of direct materials (net) on credit	$124,000
Direct manufacturing labor cost	83,000
Indirect labor	54,100
Depreciation, factory equipment	34,000
Depreciation, office equipment	7,200
Maintenance, factory equipment	22,000
Miscellaneous factory overhead	9,100
Rent, factory building	71,000
Advertising expense	92,000
Sales commissions	31,000

Inventories:
	January 1, 2014	December 31, 2014
Direct materials	$9,500	$16,000
Work in process	6,200	27,000
Finished goods	69,000	27,000

Requirements 1. Prepare journal entries to record the transactions for 2014 including an entry to close out​ over- or underallocated overhead to cost of goods sold. For each journal entry indicate the source document that would be used to authorize each entry. Also note which subsidiary​ ledger, if​ any, should be referenced as backup for the entry.

2. Post the journal entries to​ T-accounts for all of the​ inventories, Cost of Goods​ Sold, the Manufacturing Overhead Control​ Account, and the Manufacturing Overhead Allocated Account.

Answer 1

Answer (a):

Explanations:

Material Used = Beginning Direct Materials Inventory + Purchases – Ending Direct Materials Inventory
Material Used = $9,500 + $124,000 - $16,000
Material Used = $117,500

Manufacturing Cost = Material Used + Direct Manufacturing Labor Cost + Manufacturing Overhead Allocated
Manufacturing Cost = $117,500 + $83,000 + $83,000*$2.80
Manufacturing Cost = $117,500 + $83,000 + $232,400
Manufacturing Cost = $432,900

Cost of Goods Manufactured = Beginning Work in Process + Manufacturing cost – Ending Work in Process
Cost of Goods Manufactured = $6,200 + $432,900 - $27,000
Cost of Goods Manufactured =$412,100

Cost of Goods Sold = Beginning Finished Goods Inventory + Cost of Goods Manufactured – Ending Finished Goods Inventory
Cost of Goods Sold = $69,000 + $412,100 - $27,000
Cost of Goods Sold = $454,100

Answer b.