LO3-4 Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipenent 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 $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-bours. The following transactions took place during the year: a. Raw materials purchased on aceount, $200,000. b. Raw materials used in production (all difect materials), $185,000. c. Utifity bills incurred on account, $70.000 ( 90%, related to factory operations, and the remainder related to selling and administrative activities) d. Accrued salary and wage costs: e Maintenance costs incurred on aceount in the factory, $54,000. f. Advertising costs incurred on account, $136,000. g. Depreciation was recorded fot the year, $95,000 ( 800 related to Betory equipment, und the remainder nelated to selling and administrative equipment). h. Rental cost incurted on account, $120,000 ( 85% related to factory facilities, and the remainder related to selling and adminiatrative facilities 1. Manufacturing orerbead cost was applied to jobs, $ ? 1. Cost of moods manufactered for the year, $770,000. Acct240 Chapter 3 Problem 3-15 2. Accounts Receivable Sales Raw Materials Cost of Goods Sold Bal. 30,000 Bal. Work in Process Manufacturing Overhead Bal. 21,000 Bal. Bal Finished Goods Advertising Expense Bal. 60,000 Bal. Accumulated Depreciation Utilities Expense \begin{tabular}{|l|l|l|l|} \hline h & \multicolumn{1}{|c|}{} & \\ \hline & & \\ \hline & & \\ \hline i. & & \\ \hline & & \\ \hline \end{tabular} Predetermined Overhead Rate = j. 2. Accounts Receivable Sales Raw Materials Cost of Goods Sold Cost of goods manufactured 4. Schedule of cost of goods sold: Beginning finished goods inventory Add: Cost of goods manufactured Cost of goods available for sale Deduct: Ending finished goods inventory. Unadjusted cost of goods sold. Deduct: Overapplied overhead Adjusted cost of goods sold Problem 3-15 (continued) 3 Froya Fabrikker A/S Schedule of Cost of Goods Manufactured Direct materials: Beginning raw materials inventory Purchases of raw materials Total raw materials available Ending raw materials inventory Materials used in production Direct labor Manufacturing overhead applied to work in process. Total manufacturing costs Add: Beginning work in process inventory .. Deduct: Ending work in process inventory. Cost of goods manufactured 4. Schedule of cost of goods sold: Beginning finished goods inventory Add: Cost of goods manufactured Cost of goods available for sale Deduct: Ending finished goods inventory. Unadjusted cost of goods sold
