Question
Gold Nest Company of Guandong . China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through
Gold Nest Company of Guandong . China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales.
The company uses a job-order costing system in which overhead is applied tp jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $92,000 of manufacturing overhead for an estimated activity level of $40,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows:
Raw materials $10,100
Work in process $4,200
Finished Goods $ 8,300
During the year, the following transactions were completed:
a. Raw materials purchased on account $164,000
b. Raw materials used in production, $147,000 (materials costing $127,000 were charged directly to job, the remaining materials were indirect).
c. Costs for employee services were incurred as follows:
Direct labor $179,000
Indirect labor $335,300
Sales commissions $21,000
Administrative salaries $40,000
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