Question
The company uses a perpetual inventory system and has a highly labour-intensive production process, so it assigns manufacturing overhead based on direct labour cost. The
The company uses a perpetual inventory system and has a highly labour-intensive production process, so it assigns manufacturing overhead based on direct labour cost. The predetermined overhead rate was computed from the following data:
Total estimated factory overhead $2,400,000
Total estimated direct labour cost $2,000,000
The WIP account given below relates to the activities for the month of June:
WIP Inventory A/C
June 1 Balance b/f $15,000
Direct Materials Used 123,000
Additional data:
Total material requisitioned $153,000
Manufacturing Labour Costs incurred . $163,500 (75% represents direct labour)
Other manufacturing overheads incurred ... $94,275
Two jobs were completed with total costs of $183,000 and $105,000 respectively. They were sold to the hotel on account at a margin of 33 1/3% on sales.
S.no. | Particulars | Debit | Credit |
1. | Work In process Inventory | $123,000 |
|
| Manufacturing Overhead | $153,000 |
|
| To Raw Material Inventory |
| $276,000 |
|
|
|
|
2. | Wages Expense | $163,500 |
|
| To Wages payable |
| $163,500 |
|
|
|
|
3. | Work In process Inventory ($163,500 x 75%) | $122,625 |
|
| Manufacturing Overhead | $40,875 |
|
| To Wages Expense |
| $163,500 |
|
|
|
|
4. | Manufacturing Overhead | $94,275 |
|
| To Accounts Payable |
| $94,275 |
|
|
|
|
5. | Work In process Inventory ($122,625 x 120%) | $147,150 |
|
| To Manufacturing Overhead |
| $147,150 |
|
|
|
|
6. | Finished Goods Inventory($183,000+$105,000) | $288,000 |
|
| To Work in process Inventory |
| $288,000 |
|
|
|
|
7. (i) | Accounts Receivable ($288,000 x 33.33%) | $95,990.4 |
|
| To Sales Revenue |
| $95,990.4 |
|
|
|
|
(ii) | Cost of Goods sold | $288,000 |
|
| To Finished Goods Inventory |
| $288,000 |
What is the balance in the Cost of Goods Sold account after the adjustment and Compute gross profit earned on the jobs, after adjusting for the manufacturing overhead variance
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