During May, the following transactions were completed and reported by Jerico Company:
a. Materials purchased on account, $60,100.
b. Materials issued to production to fill job-order requisitions: direct materials, $50,000; indirect materials, $8,800.
c. Payroll for the month: direct labor, $75,000; indirect labor, $36,000; administrative, $28,000; sales, $19,000.
d. Depreciation on factory plant and equipment, $10,400.
e. Property taxes on the factory accrued during the month, $1,450.
f. Insurance on the factory expired with a credit to the prepaid insurance account, $6,200.
g. Factory utilities, $5,500.
h. Advertising paid with cash, $7,900.
i. Depreciation on office equipment, $800; on sales vehicles, $1,650.
j. Legal fees incurred but not yet paid for preparation of lease agreements, $750.
k. Overhead is charged to production at a rate of $18 per direct labor hour. Records show
4,000 direct labor hours were worked during the month.
l. Cost of jobs completed during the month, $160,000.
The company also reported the following beginning balances in its inventory accounts:
Materials Inventory .........$ 7,500
Work-in-Process Inventory ...... 37,000
Finished Goods Inventory ...... 50,000
Required:
1. Prepare journal entries to record the transactions occurring in May.
2. Prepare T-accounts for Materials Inventory, Overhead Control, Work-in-Process Inventory, and Finished Goods Inventory. Post all relevant entries to these accounts.
3. Prepare a statement of cost of goods manufactured.
4. If the overhead variance is all allocated to cost of goods sold, by how much will cost of goods sold decrease or increase?