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Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses
Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor- hours. Its predetermined overhead rate was based on a cost formula that estimated $336,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $245,000. b. Raw materials used in production (all direct materials), $230,00O. c. Utility bills incurred on account, $68,000 (85% related to factory operations, and the remainder related to selling and administrative activities) d. Accrued salary and wage costs Direct labor (1,125 hours) Indirect labor Selling and administrative salaries 275,000 $ 99,000 $155, 000 e. Maintenance costs incurred on account in the factory, $63,000 f. Advertising costs incurred on account, $145,000. g. Depreciation was recorded for the year, $81,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment) h. Rental cost incurred on account, $106,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities). i. Manufacturing overhead cost was applied to jobs, $ j. Cost of goods manufactured for the year, $860,000. k. Sales for the year (all on account) totaled $1,650,000. These goods cost $890,000 according to their job cost sheets
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