Question
Froya Fabrikker A/S of Bergen, Norway, manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that
Froya Fabrikker A/S of Bergen, Norway, 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 based on direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions occurred during the year:
- Raw materials purchased on account, $200,000.
- Raw materials used in production (all direct materials), $185,000.
- Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
- Accrued salary and wage costs:
Direct labor (975 hours) | $ 230,000 |
---|---|
Indirect labor | $ 90,000 |
Selling and administrative salaries | $ 110,000 |
- Maintenance costs incurred on account in the factory, $54,000.
- Advertising costs incurred on account, $136,000.
- Depreciation recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
- Rental cost incurred on account, $120,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).
- Manufacturing overhead cost applied to jobs, $??question mark?.
- Cost of goods manufactured, $770,000.
- Sales (all on account) totaled $1,200,000. These goods cost $800,000 according to their job cost sheets.
The beginning balances in the inventory accounts were:
Raw Materials | $ 30,000 |
---|---|
Work in Process | $ 21,000 |
Finished Goods | $ 60,000 |
Required:
1. Prepare journal entries to record the preceding transactions.
2. Post your entries to T-accounts. (Don't 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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started