Predetermined Overhead Rates, Variances, Cost Flows

Barrymore Costume Company, located in New York City, sews costumes for plays and musicals. Barrymore considers itself primarily a service firm, as it never produces costumes without a preexisting order and only purchases materials to the specifications of the particular job. Any finished goods ending inventory is temporary and is zeroed out as soon as the show producer pays for the order. Overhead is applied on the basis of direct labor cost. During the first quarter of the year, the following activity took place in each of the accounts listed:

Work In Process
Bal.	17,000	Complete	245,000
DL	80,000
OH	140,000
DM	40,000
Bal.	32,000

Finished Goods
Bal.	40,000	Sold	210,000
Complete	245,000
Bal.	75,000

Overhead
	138,500		140,000
		Bal.	1,500

Cost of Goods Sold
	210,000

Job 32 was the only job in process at the end of the first quarter. A total of 1,000 direct labor hours at $10 per hour were charged to Job 32.

	Required:
1.	Assuming that overhead is applied on the basis of direct labor cost, what was the overhead rate used during the first quarter of the year?
2.	What was the applied overhead for the first quarter? The actual overhead? The under- or overapplied overhead?
3.	What was the cost of the goods manufactured for the quarter?
4.	Assume that the overhead variance is closed to the cost of goods sold account. Prepare the journal entry to close out the overhead control account on March 31. Refer to the Chart of Accounts for account titles. What is the adjusted balance in Cost of Goods Sold?
5.	For Job 32, identify the costs incurred for direct materials, direct labor, and overhead.

1. Assuming that overhead is applied on the basis of direct labor cost, what was the overhead rate used during the first quarter of the year?

The overhead rate used during the first quarter of the year is of direct labor cost.

4(a) Assume that the overhead variance is closed to the cost of goods sold account. Prepare the journal entry to close out the overhead control account on March 31. Refer to the Chart of Accounts for the exact wording of account titles.

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GENERAL JOURNAL

	DATE	ACCOUNT	POST. REF.	DEBIT	CREDIT
1
2

CHART OF ACCOUNTS

Barrymore Costume Company

General Ledger

	ASSETS
110	Cash
120	Accounts Receivable
131	Supplies
132	Prepaid Insurance
141	Raw Materials
142	Work in Process
143	Overhead Control
144	Finished Goods
170	Land
180	Equipment
181	Accumulated Depreciation

	LIABILITIES
210	Accounts Payable
220	Wages Payable
230	Utilities Payable
240	Lease Payable

	EQUITY
310	Common Stock
320	Retained Earnings

	REVENUE
410	Sales

	EXPENSES
510	Cost of Goods Sold
520	Insurance Expense
530	Wages Expense
540	Supplies Expense
550	Utilities Expense
560	Depreciation Expense
590	Miscellaneous Expense

4(b) What is the adjusted balance in Cost of Goods Sold?

The adjusted balance in Cost of Goods Sold is .

5. For Job 32, identify the costs incurred for direct materials, direct labor, and overhead. Determine the ending Work in Process amount.

Job 32

1	Direct labor
2	Overhead applied
3	Direct materials
4	Ending work in process