Oslo Company produces large quantities of a standardized product. The following information is available for its production activities for May.

Additional information about units and costs of production activities follows.

During May, 10,000 units of finished goods are sold for $120 cash each. Cost information regarding finished goods follows

Required 1. Prepare journal entries dated May 31 to record the following May activities:

(a) purchase of raw ma¬ terials,

(b) direct materials usage,

(c) indirect materials usage,

(d) factory payroll costs,

(e) direct labor costs used in production,

(f) indirect labor costs, (g) other overhead costs—credit Other Accounts, (h) overhead applied, (i) goods transferred to finished goods, and (j) sale of finished goods.
2. Prepare a process cost summary report for this company, showing costs charged to production, unit cost information, equivalent units of production, cost per EUP, and its cost assignment and reconciliation.

Analysis Component 3. This company provides incentives to its department managers by paying monthly bonuses based on their success in controlling costs per equivalent unit of production. Assume that production over¬ estimates the percentage of completion for units in ending inventory with the result that its equivalent units of production in ending inventory for May are overstated. What impact does this error have on bonuses paid to the managers of the production department? What impact, if any, does this error have on these managers’ June bonuses?

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Raw materials Beginning inventory... Raw materials purchased (on credit) ... Direct materials used Indirect materials used Ending inventory. Factory payroll Factory overhead incurred $ 32,000 Indirect materials used $ 40,560 221,120 (197,120) Indirect labor used 36,320 Other overhead costs 34,432 (40,560) Total factory overhead incurred $111,312 $ 15,440 Direct labor used $123,680 Indirect labor used 36,320 Total payroll cost (paid in cash) $160,000 Factory overhead applied (90% of direct labor cost) Total factory overhead applied..... $111,312