Q-2-10: What is the over or under applied manufacturing overhead for 2019?

REQUIREMENTS 1. Review the adjusted trial balance as of November 30, 2019, in the Documents Folder. Trace the Inventory and Cost of Goods Sold account balances as of November 30, 2019, to the General Ledger. At the end of this assignment, you will be able to record cost accounting information into the General Journal and then post changes to accounts in the General Ledger and Job Cost Sheets. Core Concept Reviews Accounting Cycle Adjusting Journal Entries Closing Journal Entries Examine the Cost Sheet on page 10 of the Gatsby's Accounting System and Policies section to be sure you understand what it will cost to complete a product. 3. Review steps 1 through 4 in the Core Concept Review-Accounting Cycle for this assignment. Steps 5 through 8 will be used in Assignment 3. Complete the worksheet below related to depreciation expense: MONTHLY Sewing machines Washers and dryers Other equipment Computers Building ANNUAL $15,000 $10,000 $10,000 $10,000 $24,000 Computers Building Production Equipment 100% MOH 75% 25% 75% MOH Administrative MOH Monthly Depreciation Expense: 25% Administrative REQUIREMENTS 1. Review the adjusted trial balance as of November 30, 2019, in the Documents Folder. Trace the Inventory and Cost of Goods Sold account balances as of November 30, 2019, to the General Ledger. At the end of this assignment, you will be able to record cost accounting information into the General Journal and then post changes to accounts in the General Ledger and Job Cost Sheets. Core Concept Reviews Accounting Cycle Adjusting Journal Entries Closing Journal Entries Examine the Cost Sheet on page 10 of the Gatsby's Accounting System and Policies section to be sure you understand what it will cost to complete a product. 3. Review steps 1 through 4 in the Core Concept Review-Accounting Cycle for this assignment. Steps 5 through 8 will be used in Assignment 3. Complete the worksheet below related to depreciation expense: MONTHLY Sewing machines Washers and dryers Other equipment Computers Building ANNUAL $15,000 $10,000 $10,000 $10,000 $24,000 Computers Building Production Equipment 100% MOH 75% 25% 75% MOH Administrative MOH Monthly Depreciation Expense: 25% Administrative GATSBY MANUFACTURING INC. ADJUSTED TRIAL BALANCE as of November 30, 2019 Acct No. Account Name Debit Credit 1100 1200 1410 1420 1430 $ 3,515,248 225,000 257,700 334,500 160,000 300,000 100,000 100,000 80,000 1,000,000 1511 1512 1530 1540 1550 1601 1605 2110 2120 2130 2140 2510 2520 3100 3200 4000 Cash Accounts Receivable Materials Inventory-Denim Work-in-Process Inventory Finished Goods Inventory Sewing Machines Washers and Dryers Other Equipment Computers Building Accumulated Depreciation Equipment Accumulated Depreciation - Building Accounts Payable Other Payables Wages Payable Payroll Taxes Payable Note Payable-First Bank Note Payable-Commerce Bank Capital Stock Retained Earnings Sales Cost of Goods Sold Manufacturing Overhead Office Supplies/Utilities Expense Payroll Service Expense Other Selling and Administrative Expenses Interest Expense $ 319,500 650,000 25,000 5,000 268,700 40,305 470,500 365,000 200,000 689,110 12,969,000 5100 5200 6100 6200 6300 6500 9,729,500 30,217 4,950 2,200 140,250 22,550 TOTALS $ 16,002,115 $ 16,002,115 Cost Sheet for One Pair of Jeans Quantity Direct materials - denim Direct labor-sewing Direct labor - finishing Cost per Unit $15 per pair $20 per hour $15 per hour 12 hour per pair V4 hour per pair *For simplicity, the yards of denim needed for each pair of jeans are not provided for this project as that would require more details about each order (e.g., sizes, men/women). Manufacturing overhead is charged to jobs based on a predetermined rate of 20% of direct labor cost. Manufacturing overhead: Designer Factory supervisors Inspectors Quantity 1 person @35 hours per week 2 persons 2 persons @ 40 hours per week Cost per Unit $30 per hour $60,000 per person per year $20 per hour per inspector As seen in the earlier section on Personnel Structure and Responsibilities, 50 employees are sewers and 28 employees are finishers, each of whom work 40 hours per week. The selling price Gatsby charges its customers ranges from $40 to $50 per pair of jeans. Terms are n/30; that is, the full price is expected to be paid within 30 days. Goods are shipped FOB (free on board) shipping point, so the customer assumes legal title and responsibility for shipping and insurance costs as soon as Gatsby places the goods on the carrier. Gatsby prepares a sales invoice sent to the customer when the goods are delivered, which includes the customer's assigned account number. INVENTORY PROCEDURES There is beginning and ending raw materials inventory of denim. The oldest inventory is always used up first. Each job is a custom job that is shipped as soon as it is completed. Gatsby espouses a "lean" management philosophy; however, it does have some space in the production area of the building in case a job is finished in one month and sold and delivered the following month. There is beginning and ending work-in-process inventory each month. Notions used in the production process, such as thread, zippers, snaps, and rivets, are charged to manufacturing overhead as indirect costs as incurred. The quantity of these supplies on hand is relatively stable from month-to-month, and their value is considered nominal; therefore, no suppliesotions inventory is recorded. A box that holds 24 to 36 pair of jeans costs approximately $1.00. The cost of these shipping boxes could be traced directly to each job; however, the costs of doing so seem to outweigh the benefits, so boxes are charged to manufacturing overhead as incurred. No inventory of boxes is recorded. 10 REQUIREMENTS 1. Review the adjusted trial balance as of November 30, 2019, in the Documents Folder. Trace the Inventory and Cost of Goods Sold account balances as of November 30, 2019, to the General Ledger. At the end of this assignment, you will be able to record cost accounting information into the General Journal and then post changes to accounts in the General Ledger and Job Cost Sheets. Core Concept Reviews Accounting Cycle Adjusting Journal Entries Closing Journal Entries Examine the Cost Sheet on page 10 of the Gatsby's Accounting System and Policies section to be sure you understand what it will cost to complete a product. 3. Review steps 1 through 4 in the Core Concept Review-Accounting Cycle for this assignment. Steps 5 through 8 will be used in Assignment 3. Complete the worksheet below related to depreciation expense: MONTHLY Sewing machines Washers and dryers Other equipment Computers Building ANNUAL $15,000 $10,000 $10,000 $10,000 $24,000 Computers Building Production Equipment 100% MOH 75% 25% 75% MOH Administrative MOH Monthly Depreciation Expense: 25% Administrative REQUIREMENTS 1. Review the adjusted trial balance as of November 30, 2019, in the Documents Folder. Trace the Inventory and Cost of Goods Sold account balances as of November 30, 2019, to the General Ledger. At the end of this assignment, you will be able to record cost accounting information into the General Journal and then post changes to accounts in the General Ledger and Job Cost Sheets. Core Concept Reviews Accounting Cycle Adjusting Journal Entries Closing Journal Entries Examine the Cost Sheet on page 10 of the Gatsby's Accounting System and Policies section to be sure you understand what it will cost to complete a product. 3. Review steps 1 through 4 in the Core Concept Review-Accounting Cycle for this assignment. Steps 5 through 8 will be used in Assignment 3. Complete the worksheet below related to depreciation expense: MONTHLY Sewing machines Washers and dryers Other equipment Computers Building ANNUAL $15,000 $10,000 $10,000 $10,000 $24,000 Computers Building Production Equipment 100% MOH 75% 25% 75% MOH Administrative MOH Monthly Depreciation Expense: 25% Administrative GATSBY MANUFACTURING INC. ADJUSTED TRIAL BALANCE as of November 30, 2019 Acct No. Account Name Debit Credit 1100 1200 1410 1420 1430 $ 3,515,248 225,000 257,700 334,500 160,000 300,000 100,000 100,000 80,000 1,000,000 1511 1512 1530 1540 1550 1601 1605 2110 2120 2130 2140 2510 2520 3100 3200 4000 Cash Accounts Receivable Materials Inventory-Denim Work-in-Process Inventory Finished Goods Inventory Sewing Machines Washers and Dryers Other Equipment Computers Building Accumulated Depreciation Equipment Accumulated Depreciation - Building Accounts Payable Other Payables Wages Payable Payroll Taxes Payable Note Payable-First Bank Note Payable-Commerce Bank Capital Stock Retained Earnings Sales Cost of Goods Sold Manufacturing Overhead Office Supplies/Utilities Expense Payroll Service Expense Other Selling and Administrative Expenses Interest Expense $ 319,500 650,000 25,000 5,000 268,700 40,305 470,500 365,000 200,000 689,110 12,969,000 5100 5200 6100 6200 6300 6500 9,729,500 30,217 4,950 2,200 140,250 22,550 TOTALS $ 16,002,115 $ 16,002,115 Cost Sheet for One Pair of Jeans Quantity Direct materials - denim Direct labor-sewing Direct labor - finishing Cost per Unit $15 per pair $20 per hour $15 per hour 12 hour per pair V4 hour per pair *For simplicity, the yards of denim needed for each pair of jeans are not provided for this project as that would require more details about each order (e.g., sizes, men/women). Manufacturing overhead is charged to jobs based on a predetermined rate of 20% of direct labor cost. Manufacturing overhead: Designer Factory supervisors Inspectors Quantity 1 person @35 hours per week 2 persons 2 persons @ 40 hours per week Cost per Unit $30 per hour $60,000 per person per year $20 per hour per inspector As seen in the earlier section on Personnel Structure and Responsibilities, 50 employees are sewers and 28 employees are finishers, each of whom work 40 hours per week. The selling price Gatsby charges its customers ranges from $40 to $50 per pair of jeans. Terms are n/30; that is, the full price is expected to be paid within 30 days. Goods are shipped FOB (free on board) shipping point, so the customer assumes legal title and responsibility for shipping and insurance costs as soon as Gatsby places the goods on the carrier. Gatsby prepares a sales invoice sent to the customer when the goods are delivered, which includes the customer's assigned account number. INVENTORY PROCEDURES There is beginning and ending raw materials inventory of denim. The oldest inventory is always used up first. Each job is a custom job that is shipped as soon as it is completed. Gatsby espouses a "lean" management philosophy; however, it does have some space in the production area of the building in case a job is finished in one month and sold and delivered the following month. There is beginning and ending work-in-process inventory each month. Notions used in the production process, such as thread, zippers, snaps, and rivets, are charged to manufacturing overhead as indirect costs as incurred. The quantity of these supplies on hand is relatively stable from month-to-month, and their value is considered nominal; therefore, no suppliesotions inventory is recorded. A box that holds 24 to 36 pair of jeans costs approximately $1.00. The cost of these shipping boxes could be traced directly to each job; however, the costs of doing so seem to outweigh the benefits, so boxes are charged to manufacturing overhead as incurred. No inventory of boxes is recorded. 10