Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use
Question:
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 $380,000 of manufacturing overhead for an estimated allocation base of 1,000 direct labor-hours. The following transactions took place during the year:
A.Raw materials purchased on account, $275,000.
B.Raw materials used in production (all direct materials), $260,000.
C.Utility bills incurred on account, $74,000 (95% related to factory operations, and the remainder related to selling and administrative activities).
D. Accrued salary and wage costs:
Direct labor (1,100 hours) | $ | 305,000 |
Indirect labor | $ | 105,000 |
Selling and administrative salaries | $ | 185,000 |
E. Maintenance costs incurred on account in the factory, $69,000
F. Advertising costs incurred on account, $151,000.
G. Depreciation was recorded for the year, $87,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
H. Rental cost incurred on account, $112,000 (85% 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, $920,000.
K. Sales for the year (all on account) totaled $1,950,000. These goods cost $950,000 according to their job cost sheets.
The balances in the inventory accounts at the beginning of the year were:
Raw Materials | $ | 45,000 |
Work in Process | $ | 36,000 |
Finished Goods | $ | 75,000 |
Required:
1. Prepare journal entries to record the preceding transactions.
2. Post your entries to T-accounts. (Dont forget to enter the beginning inventory balances above.)
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.