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XYZ Manufacturing Inc. has the following data for the fiscal year ending December 31, 2023: Initial Balances and Transactions: Beginning balances: Cash $30,000, Raw Materials
XYZ Manufacturing Inc. has the following data for the fiscal year ending December 31, 2023:
- Initial Balances and Transactions:
- Beginning balances: Cash $30,000, Raw Materials Inventory $50,000, Work in Process Inventory $20,000, Finished Goods Inventory $40,000, Accounts Payable $25,000, Retained Earnings $115,000.
- Purchased raw materials for $75,000 on account.
- Issued $60,000 of raw materials to production (80% direct materials, 20% indirect materials).
- Incurred direct labor costs of $50,000 and indirect labor costs of $15,000.
- Overhead and Production:
- Applied manufacturing overhead at a rate of 150% of direct labor cost.
- Completed goods costing $120,000 and transferred them to finished goods inventory.
- Sold goods costing $100,000 for $150,000 on account.
- Adjustments:
- Actual manufacturing overhead incurred was $80,000.
- Depreciation on factory equipment was $10,000.
- Accrued utilities expense for the factory of $3,000.
Tasks:
- Journal Entries:
- Prepare journal entries for all transactions and adjustments listed above.
- Cost of Goods Manufactured:
- Prepare a schedule of Cost of Goods Manufactured.
- Financial Statements:
- Prepare an income statement for the year ending December 31, 2023.
- Variance Analysis:
- Calculate the overhead variance and explain its significance.
- Discussion:
- Discuss the impact of under-applied or over-applied overhead on the financial statements.
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