Fayman Manufacturing Company uses standard costs with its job-order cost accounting system. In January, an order (Job 84) was received for 5,500 units of product D. The standard cost of one unit of product D is as follows:
Direct materials-1.4 kg at $4 per kilogram $ 5.60
Direct labour-1 hour at $9 per hour 9.00
Overhead-1 hour (variable $7.40; fixed $8.00) 15.40
Standard cost per unit $30.00
Overhead is applied based on direct labour hours. Normal capacity for the month of January was 6,000 direct labour hours.
During January, the following transactions applicable to Job No. 84 occurred:
1. Purchased 8,200 kg of raw materials on account at $3.60 per kilogram.
2. Requisitioned 8,200 kg of raw materials for production.
3. Incurred 5,200 hours of direct labour at $9.25 per hour.
4. Worked 5,200 hours of direct labour on Job No. 84.
5. Incurred $85,760 of manufacturing overhead on account.
6. Applied overhead to Job No. 84 based on the direct labour hours.
7. Transferred Job No. 84 to finished goods.
8. Billed customer for Job No. 84 at a selling price of $280,000.
9. Incurred selling and administrative expenses of $65,000 on account.
Instructions
(a) Journalize the transactions.
(b) Post to the job-order cost accounts.
(c) Prepare the entry to recognize the overhead variances.
(d) Prepare the income statement for management for January 2012.