Question
ESS Clearpane Manufacturing makes windows for custom home builders. The company sells directly to contractors. The company uses a job-order costing system in which overhead
ESS Clearpane Manufacturing makes windows for custom home builders. The company sells directly to contractors. The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labour cost. It budgeted $5,148,000 of manufacturing overhead and estimated direct labour cost to be $3,120,000 in total this fiscal year. On March 1, inventory account balances were as follows: - Raw materials: $33,000 - Work in process: $13,000 - Finished goods: $52,000 During the month, the following inventory transactions were completed: - Raw materials were purchased on account: $358,000. - Raw materials were requisitioned for direct use in production: $286,000 - Raw materials were requisitioned for indirect use in production: $78,000 The following other transactions occurred during the month: - Rent during the month: $78,000 (80% assigned to production). - Utility costs were incurred in the factory: $74,000. - Depreciation was recorded on factory equipment: $114,000 - Depreciation was recorded on administrative equipment: $16,000 - Goods that had cost $878,000 to manufacture according to their job cost sheets were completed. - Sales (all on account) to customers during the month totalled $1,625,000. These goods cost $910,000 to manufacture according to their job cost sheets. Payroll costs for the month were as follows: - Direct labour: $234,000 - Indirect labour: $94,000 - Administrative salaries: $82,000
a) 10 marks Prepare journal entries to record the transactions for the month of March. b) 4 marks How much Manufacturing Overhead is underapplied or overapplied for the month? c) 6 marks Prepare an income statement for the month.
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