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Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year:
Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year:A. Raw materials purchased for use in production, $295,000.
B. Raw materials requisitioned for use in production (all direct materials), $280,000.
C. Utility bills were incurred, $78,000 (95% related to factory operations, and the remainder related to selling and administrative activities).
D. Salary and wage costs were incurred:
Direct labor (890 hours) $325,000
Indirect labor $109,000
Selling and administrative salaries $205,000
E. Maintenance costs were incurred in the factory, $73,000.
F. Advertising costs were incurred, $155,000.
G. Depreciation was recorded for the year, $91,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
H. Rental cost incurred on buildings, $105,000 (85% related to factory operations, and the remainder related to selling and administrative facilities).
I. Manufacturing overhead cost was applied to jobs, $ ?.
J. Cost of goods manufactured for the year, $960,000.
K. Sales for the year (all on account) totaled $2,150,000. These goods cost $990,000 according to their job cost sheets.
The balances in the inventory accounts at the beginning of the year were:
Raw materials $49,000
Work in process $40,000
Finished Goods $79,000
Required:
1. Prepare journal entries to record the above data. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2. Post your entries to T-accounts. (Don’t forget to enter the opening inventory balances below.) Determine the ending balances in the inventory accounts and in the Manufacturing Overhead account.
3. Prepare a schedule of cost of goods manufactured
4. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. Prepare a schedule of cost of goods sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
5. Prepare an income statement for the year.
6. Job 412 was one of the many jobs started and completed during the year. The job required $9,900 in direct materials and 35 hours of direct labor time at a total direct labor cost of $10,800. If the job contained six units and the company billed at 60% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer?
Answer:Froya Fabrikker A/S of Bergen, Norway1. Journal Entries:a. Debit Raw materials $295,000Credit Cash $295,000To record purchase of raw materialsb. Debit Work in Process $280,000Credit Raw materials $280,000To record direct materials requisitioned for production.c. Debit Manufacturing overhead $74,100Debit Selling and Admin. $3,900Credit Utilities Expenses $78,000To record utilities expense for manufacturing and selling and admin.d. Debit Work in Process $325,000Debit Manufacturing overhead $109,000Debit Selling and Admin. $205,000Credit Salary and Wages Expense $639,000To record labor costs for production, etc.e. Debit Manufacturing overhead $73,000Credit Maintenance Expense $73,000To record factory maintenance expense.f. Debit Selling and Admin. $155,000Credit Advertising Expense $155,000Tor record advertising expense.g. Debit Manufacturing overhead $72,800Debit Selling and Admin. $18,200Credit Depreciation Expense $91,000To record depreciation expense for production and selling and admin.h. Debit Manufacturing overhead $89,250Debit Selling and Admin $15,750Credit Rent Expense $105,000Rent expense for the year.i. Debit Work in Process $326,000Credit Manufacturing overhead $326,000To apply overhead to production.j. Debit Finished Goods $960,000Credit Work in Process $960,000To transfer completed jobs to finished goods inventory.k. Debit Account Receivable $2,150,000Credit Sales Revenue $2,150,000To record the sale of goods on account.k. Debit Cost of Goods Sold $990,000Credit Finished Goods $990,000To record the cost of goods sold.2. T-accountsRaw materialsAccount Titles Debit CreditBeginning Balance $49,000Cash 295,000Work in process $280,000Ending balance 64,000Work in processAccount Titles Debit CreditBeginning Balance $40,000Raw materials 280,000Salaries and wages 325,000Overhead 326,000Finished Goods inventory $960,000Ending balance 11,000Finished GoodsAccount Titles Debit CreditBeginning Balance $79,000Work in Process 960,000Cost of goods sold $990,000Ending balance 49,000Cost of Goods SoldAccount Titles Debit CreditFinished Goods $990,000Underapplied overhead 92,150Income Summary $1,082,150Manufacturing OverheadAccount Titles Debit CreditUtilities expense $74,100Salaries and wages 109,000Maintenance exp. 73,000Depreciation exp. 72,800Rent expense 89,250Work in Process $326,000Underapplied overhead92,150Totals $418,150 $418,150CashAccount Titles Debit CreditRaw materials $295,000Accounts receivableAccount Titles Debit CreditSales Revenue $2,150,000Sales RevenueAccount Titles Debit ...