Craftsman manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labour intensive production process, so it assigns manufacturing overhead based on direct labour cost.

Craftsman predetermined overhead application rate for 2012 was computed from the following data:

Total estimated factory overhead $480,000

Total estimated direct labour cost $800,000

The following events occurred during May 2012.

i) Purchased materials on account, $405,000

ii) Incurred manufacturing wages of $111,600

iii) Requisitioned direct materials and used direct labour in manufacturing

Direct Materials Direct Labour

$ $

Job 101 41,320 56,800

Job 102 62,100 66,000

Job 103 14,800 28,700

Job 104 19,200 21,000

iv) Issued indirect materials to production, $6,600

v) Charged indirect manufacturing wages to production, $27,900

vi) Other manufacturing overhead costs incurred on units 101 to 104 amounted to $29,800

vii) Allocated overheads to jobs at the predetermined rate

viii) Units completed: 101, 103 & 104

ix) Sold units 101 & 104 (billed customers at a mark-up of 45% on cost)

Required:

(a) Compute Craftsmans predetermined manufacturing overhead rate for 2012.

b) State the journal entries necessary to record the above transactions in the general journal.

(c) Calculate the manufacturing overhead variance for Craftsman and state the journal entries necessary to dispose of the variance.

(d) What is balance on the Cost of Goods Sold account after the adjustment

(e) Open T-accounts for Work in Process Inventory and Finished Goods Inventory. Post the appropriate entries to these accounts, identifying each entry by number. Determine the ending balances, assuming that the beginning balances were zero.