Bandway Company manufactures brass musical instruments for use by high school students. The company uses a normal-costing system, in which manufacturing overhead is applied on the basis of direct-labor hours. The company’s budget for the current year included the following predictions.

Budgeted total manufacturing overhead...................................................... $462,000

Budgeted total direct-labor hours (based on practical capacity) ..................... 21,000

During October, the firm worked on the following two production jobs:

Job number T79, consisting of 76 trombones

Job number C41, consisting of 110 cornets

The events of October are described as follows:

a. One thousand square feet of rolled brass sheet metal was purchased on account for $6,000.

b. Four hundred pounds of brass tubing was purchased on account for $5,200.

c. The following requisitions were submitted on October 5:

Requisition number 112: 260 square feet of brass sheet metal at $5.50 per square foot (for Job number T79)

Requisition number 113: 1,100 pounds of brass tubing, at $9.00 per pound (for Job number C41)

Requisition number 114: 10 gallons of valve lubricant, at $12 per gallon

All brass used in production is treated as direct material. Valve lubricant is an indirect material.

d. An analysis of labor time cards revealed the following labor usage for October.

Direct labor: Job number T79, 850 hours at $20 per hour

Direct labor: Job number C41, 950 hours at $20 per hour

Indirect labor: General factory cleanup, $4,500

Indirect labor: Factory supervisory salaries, $9,600

e. Depreciation of the factory building and equipment during October amounted to $13,000.

f. Rent paid in cash for warehouse space used during October was $1,340.

g. Utility costs incurred during October amounted to $2,400. The invoices for these costs were received, but the bills were not paid in October.

h. October property taxes on the factory were paid in cash, $2,370.

i. The insurance cost covering factory operations for the month of October was $2,900. The insurance policy had been prepaid.

j. The costs of salaries and fringe benefits for sales and administrative personnel paid in cash during October amounted to $7,500.

k. Depreciation on administrative office equipment and space amounted to $4,500.

l. Other selling and administrative expenses paid in cash during October amounted to $1,150.

m. Job number T79 was completed on October 20.

n. Half of the trombones in Job number T79 were sold on account during October for $720 each.

The October 1 balances in selected accounts are as follows:

Cash.............................................................................................. $ 11,000

Accounts Receivable.................................................................... 20,000

Prepaid Insurance......................................................................... 6,000

Raw-Material Inventory.............................................................. 150,000

Manufacturing Supplies Inventory.............................................. 600

Work-in-Process Inventory.......................................................... 89,000

Finished-Goods Inventory............................................................223,000

Accumulated Depreciation: Buildings and Equipment................ 99,000

Accounts Payable......................................................................... 14,500

Wages Payable.............................................................................. 8,500

Required:

1. Calculate the company’s predetermined overhead rate for the year.

2. Prepare journal entries to record the events of October.

3. Set up T-accounts, and post the journal entries made in requirement (2).

4. Calculate the overapplied or underapplied overhead for October. Prepare a journal entry to close this balance into Cost of Goods Sold.

5. Prepare a schedule of cost of goods manufactured for October.

6. Prepare a schedule of cost of goods sold for October.

7. Prepare an income statement for October.