Production Co. uses a normal-costing system and allocates overhead to work in process at a rate of

$ 2.80

per direct manufacturing labor dollar. Indirect materials are insignificant so there is no inventory account for indirect materials.

Requirements

1.

Prepare journal entries to record the transactions for

20142014

including an entry to close out over- or underallocated overhead to cost of goods sold. For each journal entry indicate the source document that would be used to authorize each entry. Also note which subsidiary ledger, if any, should be referenced as backup for the entry.

2.

Post the journal entries to T-accounts for all of the inventories, Cost of Goods Sold, the Manufacturing Overhead Control Account, and the Manufacturing Overhead Allocated Account.

Costs incurred:

Purchases of direct materials (net) on credit

$123,000

Direct manufacturing labor cost

82,000

Indirect labor

54,800

Depreciation, factory equipment

34,000

Depreciation, office equipment

7,300

Maintenance, factory equipment

26,000

Miscellaneous factory overhead

9,600

Rent, factory building

70,000

Advertising expense

90,000

Sales commissions

Inventories:
	1-Jan-14	31-Dec-14
Direct materials	$9,200	$14,000
Work in process	6,300	26,000
Finished goods	65,000	24,000

32,000