Maverick Wings, Inc. manufactures airplanes for  use in stunt shows. Maverick’s factory is highly automated, using the latest in robotic technology. To keep  costs low, the company employs as few factory workers as possible. Since each plane has different features  (such as its shape, weight, and color), Maverick uses a job order costing system to accumulate product costs.

At the end of 2020, Maverick’s accountants developed the following expectations for 2021 based on  the marketing department’s sales forecast:

Budgeted overhead cost .................................    $1,050,000

Estimated machine hours ...............................           50,000

Estimated direct labor hours ...........................          10,000

Estimated direct materials cost .......................   $1,500,000

Maverick’s inventory count, completed on December 31, 2020, revealed the following ending inventory  balances:

Raw Materials Inventory ...................................     $  75,800

Work in Process Inventory ...............................     $626,000

Finished Goods Inventory ...............................      $340,000

The company’s 2021 payroll data revealed the following actual payroll costs for the year:

The following information was taken from Maverick’s Schedule of Plant Assets. All assets are depreciated  using the straight-line method.

Other miscellaneous costs for 2021 included:
Cost Amount  Factory insurance $14,000  Administrative office utilities $6,000  Factory utilities $32,000  Office supplies $5,000  Additional information about Maverick’s operations in 2021 includes the following:  

• Raw materials purchases for the year amounted to $1,945,000.  

• The company used $1,924,000 in raw materials during the year. Of that amount, 80% was direct materials and 20% was indirect materials.  

• Maverick applied overhead to Work in Process Inventory based on direct materials cost.  

• Airplanes costing $2,870,000 to manufacture were completed and transferred out of Work in Process  Inventory.  

• Maverick uses a markup of 150% to price its airplanes. Sales for the year were $7,250,000. (Note: This  transaction requires two journal entries.) 

Required  

Use the information just given to answer the following questions:  

a. What was Maverick’s predetermined overhead rate in 2021?
b. Prepare the journal entries to record Maverick’s costs for 2021.  

c. Prepare the appropriate T-accounts for Raw Materials Inventory, Work-in-Process Inventory, Finished Goods Inventory, Manufacturing Overhead Control, Cost of Goods Sold, and Sales, and record Maverick’s transactions for 2021. Calculate the ending balance in each account.  

d. Was manufacturing under- or overapplied in 2021? By how much?  

e. Make the adjusting entry necessary to close the under- or overapplied overhead to cost of goods sold.  

f. If Maverick chooses instead to prorate under- or overapplied overhead, how much would be  allocated to Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold for 2021?  

g. Job 3827 was started and completed in 2021. The job required 500 machine hours, 300 direct labor hours, and $75,000 in direct materials to complete. What was the total cost of this job? Using Maverick’s 150% markup, what sales price would be charged for this airplane?  

h. If Maverick had chosen to use machine hours as its overhead application base, what would the rate  have been in 2021? Why would that application base have been a logical choice for Maverick?

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Annual Total Hours Worked per Employee Number Salary per Employee Wage Rate Job Title Employed per Hour President and CEO 1 $225,000 Vice president and CFO Factory manager Assistant factory manager Machine operator Security guard, factory Forklift operator $178,000 $ 48,000 $ 35,000 1 1 1 4 $20.00 2,250 $ 25,000 2 $15.00 2,000 $ 35,000 Corporate secretary Janitor, factory 1 $12.00 2,150