Maverick Wings, Inc. manufactures airplanes for use in stunt shows. Mavericks factory is highly automated, using the latest in robotic technology. To keep costs low, the company employs as few factory workers as possible. Since each plane has different features (such as its shape, weight, and color), Maverick uses a job order costing system to accumulate product costs. At the end of 2013, Mavericks accountants developed the following expectations for 2014 based on the marketing departments sales forecast: Budgeted overhead cost $1,099,000 Estimated machine hours 48,000 Estimated direct labor hours 10,000 Estimated direct materials cost $1,520,000 Mavericks inventory count, completed on December 31, 2013, revealed the following ending inventory balances: Raw Materials Inventory $251,000 Work in Process Inventory $627,000 Finished Goods Inventory $1,250,000 The companys 2014 payroll data revealed the following actual payroll costs for the year: Job Title Number Employed Wage Rate per Hour Annual Salary per Employee Total Hours Worked per Employee President and CEO 1 $224,000 Vice president and CFO 1 $177,000 Factory manager 1 $40,500 Assistant factory manager 1 $34,000 Machine operator 5 $14.50 2,250 Security guard, factory 2 $20,000 Materials handler 2 $7.50 2,000 Corporate secretary 1 $35,500 Janitor, factory 2 $6 2,150 The following information was taken from Mavericks Schedule of Plant Assets. All assets are depreciated using the straight-line method. Plant Asset Purchase Price Salvage Value Useful Life Factory building $4,000,000 $150,000 20 Years Administrative office $650,000 $125,000 30 Years Factory equipment $2,000,000 $20,000 12 Years Other miscellaneous costs for 2014 all paid in cash included: Cost Amount Factory insurance $13,100 Administrative office utilities $6,000 Factory utilities $30,600 Office supplies $5,900 Additional information about Mavericks operations in 2014 includes the following: Raw materials purchases for the year amounted to $1,948,000. All purchases were on account. The company used $1,870,000 in raw materials during the year. Of that amount, 85% was direct materials and 15% was indirect materials. Maverick applied overhead to Work in Process Inventory based on direct materials cost. Airplanes costing $3,450,000 to manufacture were completed and transferred out of Work in Process Inventory. Maverick uses a markup of 80% to price its airplanes. Sales for the year were $6,570,000. (Note: This transaction requires two journal entries.) All sales were on account. What was Mavericks predetermined overhead rate in 2014? (Round answer to 2 decimal places, e.g. 2.45%.) Predetermined overhead rate 72,30 % of direct materials cost SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entries to record Mavericks costs for 2014. (Use Salaries Payable and Wages Payable accounts for payroll costs.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Post entries in order presented in the problem. Round answers to 0 decimal places, e.g. 345,000.) No. Account Titles and Explanation Debit Credit 1. Salaries and Wages Expense Salaries Payable (To record salaries for president, vice president, and corpoarte secretary) 2. Manufacturing Overhead Salaries Payable (To record labor costs for factory manager, assistant factory manager, and two security gaurds) 3. Work in Process Inventory Manufacturing Overhead Wages Payable (To record direct labor) 4. Depreciation Expense Accumulated Depreciation (To record depreciation on administrative office equipment) 5. Manufacturing Overhead Accumulated Depreciation (To record depreciation on factory building and equipment) 6. Office Supplies 5,900 Office Utilities 6,000 Cash 11,900 (To record administrative office utilities and office supplies expense) 7. Manufacturing Overhead Cash (To reocrd factory insurance and factory utilities) 8. Raw Materials Inventory 1,948,000 Accounts Payable 1,948,000 (To record raw materials purchases) 9. Work in Process Inventory 1,589,500 Manufacturing Overhead 280,500 Raw Materials Inventory 1,870,000 (To record direct materials and indrect materials used in production) 10. Work in Process Inventory Manufacturing Overhead (To apply overhead to work in process) 11. Finished Goods Inventory 3,450,000 Work in Process Inventory 3,450,000 (To record transfer of completed airplanes) 12. Cost of Goods Manufactured Finished Goods Inventory (To record cost of airplanes sold) 13. Accounts Receivable 6,570,000 sales 6,570,000 (To record sale of airplanes to customers) SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the appropriate T-accounts for Raw Materials Inventory, Work-in-Process Inventory, Finished Goods Inventory, Manufacturing Overhead Control, Cost of Goods Sold, and Sales, and record Mavericks transactions for 2014. (Post entries in order presented in the problem. Round answers to 0 decimal places, e.g. 345,000.) Raw Materials Work in Process Inventory Finished Goods Inventory Manufacturing Overhead Cost of Goods Sold Sales Revenue SHOW LIST OF ACCOUNTS LINK TO TEXT Was manufacturing under- or overapplied in 2014? By how much? (Round answer to 0 decimal places, e.g. 345,000.) Overheads by $ SHOW LIST OF ACCOUNTS LINK TO TEXT Make the adjusting entry necessary to close the under- or overapplied overhead to cost of goods sold. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 345,000.) Account Titles and Explanation Debit Credit Cost of Goods Sold Manufacturing Overhead SHOW LIST OF ACCOUNTS LINK TO TEXT If Maverick chooses instead to prorate under- or overapplied overhead, what would the adjusted balances be in Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold for 2014? (Round answers to 0 decimal places, e.g. 345,000 and percentage of total to 2 decimal places e.g. 34.52). Adjusted Balance Work In Process $ Finished Goods $ Cost of Goods Sold $ SHOW LIST OF ACCOUNTS LINK TO TEXT Job 3827 was started and completed in 2014. The job required 1,200 machine hours, 900 direct labor hours, and $77,000 in direct materials to complete. What was the total cost of this job? Using Mavericks 80% markup, what sales price would be charged for this airplane? (Round answers to 0 decimal places, e.g. 345,000.) Total Cost $ Sales Price $ SHOW LIST OF ACCOUNTS LINK TO TEXT If Maverick had chosen to use machine hours as its overhead application base, what would the rate have been in 2014? (Round answer to 2 decimal places, e.g. 2.45.) Predetermined rate $ / SHOW LIST OF ACCOUNTS LINK TO TEXT