Question
Starz Invitations & More does Customized, hand crafted memorabilia, in which each batch of items is a job. The company has a highly labour intensive
Starz Invitations & More does Customized, hand crafted memorabilia, in which each batch of items is a job. The company has a highly labour intensive production process, so it allocates manufacturing overhead based on direct labour hours.
Starz pre-determined overhead application rate for 20X8 was computed from the following data:
Total estimated factory overheads $2400000
Total estimated direct labour hours 40000
At the end of May 20X8,starz invitations &more reported the following inventories:
Dr Materials Inventory CR DR WIP Inventory CR DR Finished goods Inventory CR
Bal $208000 | Bal $176000 | Bal $95000 |
During June 20X8,Starz invitations & More actually used 3000 direct Labour hours and recorded the following transactions.
(I) | Purchased materials on account | $310000 |
(II) | Manufacturing wages incurred | $400000 |
(III) | Materials requisitioned (includes $30000 of indirect Materials) | $420000 |
(IV) | Assigned manufacturing wages,85% direct labour,15% indirect labour | |
(V) | Depreciation expense on factory equipment used on the different jobs | $95000 |
(VI) | Other manufacturing overhead incurred | $35000 |
(VII) | Allocated Manufacturing overhead for June 20X8 | |
(VIII) | Costs of jobs completed | $995000 |
(VIII) | Cost of jobs sold(on account)at margin of 33 1/3% on sales | $960000 |
Required :
- Compute Starzs Predetermined manufacturing overhead rate 20X8.
- State the journal entries necessary to record the above Transactions in the general Journal. Assume that Starz uses the perpetual inventory system. Compute
- Post the manufacturing Overhead Transactions to the Manufacturing overhead T- account and state the balance on the account before performing end of period closing entries. Show the Journal entries necessary to dispose of the variance.
- What is the balance in the cost of goods sold account after the adjustment?
- Compute Starzs Gross profit earned on the Jobs completed.
- Open T-Accounts for Materials inventory, Work in progress inventory and Finished Goods inventory. Post the appropriate entries to these accounts & determine the ending account balances
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