#5-26

During May, the following transactions were completed and reported by Jerico Company:

1. Materials purchased on account, $60,100.

2. Materials issued to production to fill job-order requisitions: direct materials, $50,000; indirect materials, $8,800.

3. Payroll for the month: direct labor, $75,000; indirect labor, $36,000; administrative, $28,000; sales, $19,000.

4. Depreciation on factory plant and equipment, $10,400.

5. Property taxes on the factory accrued during the month, $1,450.

6. Insurance on the factory expired with a credit to the prepaid insurance account, $6,200.

7. Factory utilities, $5,500.

8. Advertising paid with cash, $7,900.

9. Depreciation on office equipment, $800; on sales vehicles, $1,650.

10. Legal fees incurred but not yet paid for preparation of lease agreements, $750.

11. Overhead is charged to production at a rate of $18 per direct labor hour. Records show 4,000 direct labor hours were worked during the month.

12. Cost of jobs completed during the month, $160,000.

The company also reported the following beginning balances in its inventory accounts:

Materials Inventory	$ 7,500
Work-in-Process Inventory	37,000
Finished Goods Inventory	50,000

Instructions:

1) Prepare the journal entries to record the transactions occurring in May.

2) Prepare T-accounts for Material Inventory, Overhead Control, Work-in-Process Inventory, and Finished Goods Inventory. Post all relevant entries to these accounts.

3) Prepare a statement of Cost of Goods Manufactured.

4) If the overhead variance is all allocated to Cost of Goods Sold, by how much will Cost of Goods Sold decrease or increase?