1. The balance in Clay Company's raw materials inventory account was $45,000 at the beginning of April. Raw materials purchased during the month totalled $55,000. Clay used $48,000 in direct materials and $14,000 in indirect materials for the month. Prepare separate journal entries to record the following items: (a) Raw materials purchased for the month, assuming all purchases were on account (b) The transfer of direct materials into production (c) The transfer of indirect materials into production 2. Elko Company expects to incur $800,000 in manufacturing overhead costs this year. During the year, it expects to use 10,000 direct labour hours at a cost of $200,000 and 4,000 machine hours. (a) Prepare a predetermined overhead rate based on direct labour hours, direct labour cost, and machine hours. (b) Why might Elko Company prefer to use direct labour hours or direct labour costs, rather than machine hours, to allocate manufacturing overhead? (c) Using each of the predetermined overhead rates for Elko Company calculated in part a and the data that follows for job 15B, determine the cost of job 15B. Direct materials $1,750 Direct labour $860 (30 hours at $12 per hour) + (50 hours at $10 per hour) Machine time 20 hours 3. Marine Products, Inc., incurred the following actual overhead costs for the month of June. Indirect materials $20,000 Indirect labour $18,000 Rent $3,000 Equipment depreciation $6,500 Overhead is applied based on a predetermined rate of $12 per machine hour, and 5,100 machine hours were used during June. (a) Prepare a journal entry to record actual overhead costs for June. Assume that labour costs will be paid next month and that rent was prepaid. (b) Prepare a journal entry to record manufacturing overhead applied to jobs during June (c) Create a T-account for manufacturing overhead, post the appropriate information from parts a and b to this account, and calculate the ending balance. (d) Is manufacturing overhead overapplied or underapplied? Using the balance in the manufacturing overhead account calculated in part c, prepare the journal entry to close manufacturing overhead to cost of goods sold. 4. Racing Bikes, Inc., produces custom bicycles for professional racers. Each bike is built to customer specifications. During July, its first month of operations, Racing Bikes began production of four customer ordersjobs 1 through 4. The following transactions occurred during July. Purchased bike parts totalling $14,400 Processed material requisitions for the following items: Processed timesheets showing the following: Applied overhead using a predetermined rate of $30 per direct labour hour Completed and transferred to finished goods jobs 1, 2, and 3 Delivered jobs 1 and 2 to customers, billing them $6,000 for job 1 and $3,500 (a) Calculate the production costs incurred in July for each of the four jobs (b) Make the appropriate journal entry for each transaction described previously. Assume all payments will be made next month. (c) How much gross profit did Racing Bikes, Inc., earn from the sale of job 2 ?