Nassor, Inc. has the following balances in its inventory accounts at May 1.
Raw Material (all direct to production)...................... $ 5,000
Work in Process......................................................... 65,080
Finished Goods......................................................... 12,500
The following transactions occurred in the company for May.
• Purchased raw material on account, $205,700.
• Issue draw material to production, $190,000.
• Accrued direct labor wages for 11,000hours, $98,240.
• Recorded depreciation on factory equipment, $9,500.
• Paid indirect labor wages, $38,565.
• Recorded the expiration of prepaid insurance on the factory building, $4,000.
• Received and paid the utility bill, $3,500.
• Paid maintenance costs of the factory and factory equipment, $6,250.
• Applied overhead to goods in process. Nassor, Inc. applies overhead to production at a rate of $4.50 per direct labor hour.
• Transferred completed goods to finished goods, $328,655.
• Sold goods costing $306,140 to credit customers for $572,320.
Required:
(a) Prepare journal entries to record the May transactions for Nassor, Inc. Use a single account for both variable and fixed overhead.
(b) Compute the balances in the three inventory accounts at May 31.
(c) Prepare a Schedule of Cost of Goods Manufactured.
(d) Is overhead under-applied or over-applied for May, and by how much? If this overhead were to be closed, would closing cause Cost of Goods Sold to increase or decrease? Explain.
(e) Prepare a Statement of Cost of Goods Sold. Because this is not the end of the year, do not include the under-applied or over-applied overhead in the statement.