Problem 4-32 (Part Level Submission) Sunland Wings, Inc. manufactures airplanes for use in stunt shows. Sunland's 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), Sunland uses a job order costing system to accumulate product costs. At the end of 2016, Sunland's accountants developed the following expectations for 2017 based on the marketing department's sales forecast: Budgeted overhead cost Estimated machine hours Estimated direct labor hours Estimated direct materials cost $1,125,000 47,000 10,000 $1,500,000 Sunland's inventory count, completed on December 31, 2016, revealed the following ending inventory balances: Raw Materials Inventory Work In Process Inventory Finished Goods Inventory $249,000 $625,000 $1,560,000 The company's 2017 payroll data revealed the following actual payroll costs for the year: Job Title President and CEO Vice president and CFO Factory manager Assistant factory manager Machine operator Security guard, factory Forklift operator Corporate secretary Janitor, factory Annual Total Hours Number Wage Rate Salary per Worked per Employed per Hour Employee Employee $222,000 $177,000 $40,500 $31,600 $14.5 2,250 $20,800 $7.5 2,000 $36,300 2,150 The following information was taken from Sunland's Schedule of Plant Assets. All assets are depreciated using the straight-line method. Plant Asset Factory building Administrative office Factory equipment Purchase Price Salvage Value Useful Life $4,000,000 $150,000 20 Years $650,000 $125,000 30 Years $2,000,000 $20,000 12 Years Other miscellaneous costs for 2017 all paid in cash included: Cost Factory insurance (fully expired) Administrative office utilities Factory utilities Office supplies (fully consumed) Amount $13,300 $5,900 $32,800 $5,000 Additional information about Sunland's operations in 2017 includes the following: Raw materials purchases for the year amounted to $1,949,000. All materials were purchased on account. The company used $1,860,000 in raw materials during the year. Of that amount, 85% was direct materials and 15% was indirect materials. Sunland 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. Sunland uses a markup of 80% to price its airplanes. Sales for the year were $6,570,000. All sales are made on account. (Note: This transaction requires two journal entries.) What was Sunland's predetermined overhead rate in 2017? (Round answer to 2 decimal places, e.g. 52.75%.) IL Predetermined overhead rate % of direct materials cost Click if you would like to Show Work for this question: Open Show Work (b) Prepare the journal entries to record Sunland's costs for 2017. (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 o decima places, e.g. 5,275.) No. Account Titles and Explanation Debit Credit 1. Salaries and Wages Expense Salaries Payable (To record salaries for president, vice president, and corpoarte secretary) Manufacturing Overhead Salaries Payable (To record salaried factory worker costs) 3. Work in Process Inventory Manufacturing Overhead Wages Payable (To record hourly factory worker costs) 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 Utilities 5900 Office Supplies 5000 Cash 10900 (To record administrative office utilities and office supplies expense) Manufacturing Overhead Cash (To record factory insurance and factory utilities) 8. Raw Materials Inventory 1949000 Accounts Payable 1949000 (To record raw materials purchases) Work in Process Inventory Manufacturing Overhead Raw Materials Inventory (To record direct materials and indirect materials used in production) 10. Work in Process Inventory Manufacturing Overhead (To apply overhead to work in process) Finished Goods Inventory 3450000 Work in Process Inventory 3450000 (To record transfer of completed airplanes) 12. Accounts Receivable 6570000 Sales Revenue 6570000 (To record sale of airplanes to customers) 13. Cost of Goods Sold Finished Goods Inventory (To record cost of airplanes sold)