Delta Manufacturing Company applies manufacturing overhead to jobs on the basis of machine hours. The 2012 estimates
Question:
Delta Manufacturing Company applies manufacturing overhead to jobs on the basis of machine hours. The 2012 estimates of manufacturing overhead and machine hours were:
Manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,825,000
Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365,000
Delta had the following transactions for October 2012:
a. Raw materials of $420,000 were purchased on account.
b. Raw materials of $400,000 were issued to production; 90% were direct materials, and the balance was indirect materials.
c. Direct labor costs incurred, $300,000
d. Indirect labor costs incurred, $55,000
e. Selling, general, and administrative expenses incurred, $150,000
f. Manufacturing overhead costs incurred:
Plant depreciation (factory) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000
Equipment depreciation (factory) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000
Utilities (factory) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000
Factory maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
Factory taxes and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Miscellaneous manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
g. Machine hours for the month, 30,400
h. Eighty-five percent of Work-in-Process Inventory was transferred to Finished Goods Inventory. Assume that beginning Work-in-Process Inventory amounted to $95,000.
i. All finished goods are sold for cash at a 20% markup over costs of production. (There is no beginning or ending finished goods inventory.)
j. Over- or under-applied manufacturing overhead is charged to Cost of Goods Sold, and the overhead account is closed.
Required:
1. Prepare journal entries to reflect the flow of costs incurred during October.
2. Assuming that beginning raw materials inventory was $16,000 and beginning work-in- process inventory was $95,000, prepare a Cost of Goods Manufactured schedule for October 2012.
Step by Step Answer:
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain