P1. Coyote Company manufactures and sells 2 products: EL and GL. Coyote uses a job-order costing system in which overhead is applied to jobs on the basis of machine hours. Its predetermined overhead rate is based on a cost formula that estimated $300,000 of manufacturing overhead for an estimated activity level of 25,000 machine hours. The inventory balances at the beginning and at the end were as follows:

                                    At the beginning         At the end

Raw materials             $40,000                       $?

Work in process-EL    $10,000                       $18,000

Work in process-GL   $15,000                       $25,000

Finished goods            $70,000                       $84,000

Actual machine hours for the productions of EL and GL were

EL       14,000 machine hours

GL       12,000 machine hours

During the year, the following transactions were completed:

1. Raw materials purchased for cash, $360,000.
2. Raw materials used in production, $380,000 (materials costing $200,000 were charged directly to WIP-EL and $140,000 to WIP-GL; the remaining materials were indirect).
3. Cash paid to employees as follows:
   1. Direct labor for EL                 $100,000
   2. Direct labor for GL                 $150,000
   3. Indirect labor                          $190,000
   4. Sales commissions                  $60,000
   5. Administrative salaries           $80,000

4. Cash paid for rent during the year was $30,000 ($20,000 of this amount related to factory operations, and the remainder related to selling and administrative activities).
5. Depreciations on property, plant, and equipment was $40,000 (($30,000 of this amount related to factory operations, and the remainder related to selling and administrative activities).
6. Cash paid for other manufacturing overhead as follows:
   1. Utility              $20,000
   2. Insurance        $10,000
7. Sales revenues earned were $1,800,000

Instructions:

1. Prepare all necessary journal entries for the above transactions.
2. If manufacturing overhead costs were overapplied or underapplied, prepare a journal entry to close it to costs of goods sold.
3. Compute COGM of EL and COGM of GL for the year.
4. Prepare gross profit section of income statement for the year.

Answer rating: 100% (QA)

Overhead rate 300000 25000 12 per hour Overhead applied 26000 x 12 312000 Actual Overhead 40000190000200003000030000 310000 Overapplied Overhead 31200... View the full answer