Question: The following events occurred over the course of a year

The following events occurred over the course of a year at Bagby Corp., which uses a job order costing system:
1. Direct materials purchases totaled $460,000.
2. $230,000 of indirect materials were used in production. Bagby uses a separate Supplies Inventory account for indirect materials.
3. $415,000 of direct materials were used in production.
4. The direct labor payroll was $940,000 (credit Wages Payable).
5. Other manufacturing overhead costs incurred during the year totaled $540,000.
6. Bagby applies overhead based on a predetermined overhead rate of $15 per machine hour. The company used 50,000 machine hours during the year.
7. During the year, Bagby transferred goods costing $2,100,000 into the Finished Goods Inventory account.
8. Bagby sold products with a manufacturing cost of $2,050,000 to customers during the year.

a. Prepare journal entries to record these events.
b. Prepare T-accounts for the following accounts: Direct Materials Inventory, Work in Process Inventory, Manufacturing Overhead Control, and Finished Goods Inventory.
Record the transactions from part (a) in the T-accounts and calculate ending account balances. Assume the following beginning account balances:
Account Balance
Direct Materials Inventory...... $20,000
Work in Process Inventory..... $12,000
Finished Goods Inventory.... $35,000

c. Was overhead under- or overapplied for the year? By how much?

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  • CreatedFebruary 21, 2014
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