Question 1

Modern Cabinets has decided to price its cabinets at 60% above cost. The problem is that they aren't sure how to assign factory overhead. Your manager has asked you to price the following two jobs based on the information provided:

• Estimated factory overhead for the year: $600,000
• Estimated direct labor hours for the year: 200,000
• Job 1 has incurred $3,000 of direct materials and $2,000 of direct labor, which is consistent with 200 hours of labor.
• Job 2 has incurred $3,500 of direct materials and $3,000 of direct labor, which is consistent with 300 hours of labor.

Question 2

1. Assuming Modern Cabinets applies $510,000 of factory overhead to all of its jobs this year but has actual factory overhead of $505,000, has overhead been over- or underapplied?
2. If the current COGS is $2,000,000, what should the ending COGS be after reconciling the actual and applied overhead?

Question 3

Prepare the journal entries needed based on the information below. Use the lesson example to assist you:

• Estimated overhead for the month: $10,000
• Estimated direct labor hours: 10,000
• Purchased $30,000 of materials
• Requisitioned $25,000 of materials to be placed into production
• Incurred $95,000 of direct labor during the month (9,500 hours)
• Incurred the following actual factory overhead amounts:
  • Utilities: $6,000
  • Indirect materials: $300
  • Indirect labor: $1,200
  • Rent: $1,500
• Completed two jobs with a cost of $12,000
• Sold both jobs completed at a price = cost + 60%