Thirteenth Edition College Accounting Chapters 1-30

Chapter 27 Problem Set A

OBJECTIVE: Recording purchase and issuance of direct and indirect materials, recording labor costs, applying overhead, computing overapplied or underapplied overhead, recording cost of jobs completed, and cost of goods sold.

In April 2013, NoCal Trailers Co. had the following cost data:

COST DATA

a. Raw materials costing $82,000 were purchased.

b. Raw materials costing $80,000 were used: direct materials, $75,000; indirect materials $5,000.

c. Factory wages of $52,000 were incurred: direct labor $50,000; indirect labor $2,000. Social security tax deductions were $3,224, Medicare tax deductions were $754, federal income tax deductions were $7,800.

d. Other overhead costs of $28,000 were incurred. (Credit Accounts Payable.)

e. Estimated manufacturing overhead costs were applied to jobs in production at the rate of 80 percent of direct labor costs

f. Finished goods costing $150,000 were transferred from production to the warehouse.

g. The cost of goods sold was $120,000.

h. Sales on account for the month were $250,000.

INSTRUCTIONS (These are to be created in separate worksheets called the general journal, Manufacturing Overhead Computations worksheet, and the partial income statement)

1. Prepare general journal entries to record each item of cost data given. Use the account titles listed in your textbook.

2. Compute the amount of over applied or under applied overhead for the month.

3. Prepare a partial income statement for April. Adjust the Cost of Goods Sold for any over applied or under applied overhead.

Analyze: Based on the partial income statement you have prepared, what portion of each sales dollar is realized as gross profit?,