Solve the problem using the normal method for recording manufacturing journal entries

Case info:

Problem

Inventory report

Cost sheet

Actual general ledger

Actual Operating Information for the Current Year (Tasks 7 to 11): The company actually sold 592,635 pillows this year. The company actually manufactured 601,500 pillows this year. Actual direct labor hours worked making pillows this year were: Cutting Machine Operators 11,213 Assembly Machine Operators 32,615 Packing Employees 15,328 See inventory reports for information related to direct materials, work in process and finished goods. Task 8: Recording Manufacturing Costs: 1. Record the journal entries the company would have made for the year related to all product costs. Use amounts in the actual general ledger and actual information. A. Purchase direct materials B.Use direct materials to make pillows C. Transfer manufacturing overhead to manufacturing overhead control accounts D. Use direct labor to make pillows E. Apply overhead: estimate the amount of manufacturing overhead used F. Get manufacturing overhead to 0: make applied equal to actual G. Transfer the cost of completed goods to finished goods H. Record the cost of goods sold and sales A. Purchase direct materials Debit Credit Cotton Cloth - Purchases Poly Fiber Fill - Purchases Plastic Bag - Purchases Accounts Payable $0 B. Use direct materials to make pillows Debit Credit $0 Work in Process Cotton Cloth - Purchases Poly Fiber Fill - Purchases Plastic Bag - Purchases C. Transfer manufacturing overhead to manufacturing overhead control accounts Credit Debit Variable Manufacturing Overhead Fixed Manufacturing Overhead Indirect Materials Depreciation - Mfg. Equipment Machine Maintenance Utilities - Manufacturing Janitor Service - Manufacturing Plant Manager Production Supervisors (3) Payroll Taxes - Manufacturing Salaries Payroll Taxes - Manufacturing Wages Health Insurance - Mfg Employees Rent - Manufacturing Manufacturing Bldg. Property Tax & Insur. Training - Manufacturing Employees Computer Costs - Manufacturing Credit $0 D. Use direct labor to make pillows Debit Work in Process Wages - Cutting Machine Operator Wages - Assembly Machine Operator Wages - Packing E. Apply overhead: estimate the amount of manufacturing overhead used Calculate the amount of manufacturing overhead applied: Variable Fixed Total Actual Machine Hours X Rate per machine hour = MOH Applied $0 $0 Credit $0 Debit Work in Process Variable Manufacturing Overhead Fixed Manufacturing Overhead F. Get manufacturing overhead to 0: make applied equal to actual Determine the amount of manufacturing overhead over or under applied: Actual - Applied Fixed MOH Variable MOH =underl(over) $0 $0 Debit Credit Work in Process Variable Manufacturing OH Fixed Manufacturing OH G. Transfer the cost of completed goods to finished goods Determine the total cost of making products that were finished: Beginning Work In Process + Direct Material + Direct Labor + Manufacturing O/H Applied + MOH Adjustment to Actual -Ending Work In Process = Total to Finished Goods Entry B. Entry D. Entry E. Entry F. $0 Debit Credit Finished Goods Work in Process H. Record the cost of goods sold and sales Debit Credit Cost of Goods Sold Finished Goods See Task 7 Credit Debit Accounts Receivable Sales See General Ledger Actual Inventory on Hand on December 31st of the Current Year: Description 101 102 103 Quantity On Hand Cotton Fabric 110,497 Poly Fiber Fill 2.939,585 Plastic Bag 129,569 Total Direct Materials Average Cost Per: $ 1.97 $ 0.09 $ 0.13 Total Inventory $ 217,679 $ 264,563 $ 16.844 $ 499,086 Work In Process 3,427 $ 9,664 Finished Goods Pillows 154,062 $ 5.8124 $ 895,470 Total Inventory $ 1.404,220 Actual Inventory Changes in Quantity During the Current Year: Description 101 102 103 Cotton Fabric Poly Fiber Fill Plastic Bag Beginning Inventory 102,625 2,896,532 110,632 Quantity Ending Purchased Quantity Used Inventory 475,000 467,128 110,497 12,200,000 12,156,947 2,939,585 650,000 631,063 129,569 Finished Goods Pillows 145,197 601,500 592,635 154,062 Actual Inventory Changes in Dollars During the Current Year: Inventory Cotton Fabric Poly Fiber Fill Plastic Bag Dollars January 1 Purchased Dollars Used December 31 $ 202,171 $ 935,750 $ 920,242 $ 217,679 $ 260,688 $ 1,098,000 $1,094,125 $ 264,563 $ 14,382 S 84,500 $ 82,038 $ 16,844 $ 477,241 $ 2,118,250 $ 2,096,405 $ 499,086 Total Direct Materials Work In Process $ 8,329 $ 1,335 $- $ 9,664 Finished Goods $ 848,775 $ 3,496,132 $3,449,437 $ 895,470 Total Inventory $ 1,334,345 $ 5,615,717 $5,545,842 $ 1,404,220 Exhibit 2: Cost Sheet ANSWER Direct Materials: Cotton Fabric Poly Fiber Fill Plastic Bag Quantity 0.75 20.00 1.001 Cost for 1 $ 1.89 $ 0.08 $ 0.11 Total Cost $ 1.42 $ 1.60 $ 0.11 $ 3.131 Total Direct Materials: Hours Required to Direct Labor: Make 1 Pillow Cutting Machine Operator 0.03 Assembly Machine Operators (2) 0.05 Packing 0.02 Total Direct Labor Hours: 0.10 Total Machine Hours 0.08 Cost per Hour $ 16.69 $ 15.00 $ 9.00 Total Cost $ 0.50 $ 0.75 $ 0.18 $ 1.43 Manufacturing Overhead Costs: Variable Fixed Total Manufacturing Overhead Costs: Rate per Machine Hour (Task 2) $ 4.92 $ 7.47 Total Machine Hours per Unit 0.08 0.08 Total Cost $ 0.39| $ 0.60 $0.99 Total Cost to Manufacture 1 Pillow: $ 5.551 Exhibit 3: Actual General Ledger Sales: 4-1000 Sales - Pillows Actual Amount in Dollars $5,327,789 592,635 $ 8.99 Pillows each Variable MOH Fixed MOH 29,156 43,500 Manufacturing Costs: 5-1000 Cotton Cloth - Purchases 5-1020 Poly Fiber Fill - Purchases 5-1040 Plastic Bag - Purchases 5-2000 Indirect Materials (Thread & Supplies) 5-3000 Wages - Cutting Machine Operator 5-3010 Wages - Assembly Machine Operator 5-3020 Wages - Packing 5-4000 Depreciation - Manufacturing Equipment 5-4010 Machine Maintenance 5-5000 Utilities - Manufacturing 5-5050 Janitor Service - Manufacturing 5-6000 Plant Manager 5-6020 Production Supervisors 5-6060 Payroll Taxes - Manufacturing Salaries 5-6065 Payroll Taxes - Manufacturing Wages 5-6080 Health Insurance - Manufacturing Employees 5-7000 Rent - Manufacturing 5-7020 Manufacturing Bldg. Property Tax & Insurance 5-9000 Training - Manufacturing Employees 5-9050 Computer Costs - Manufacturing DM DL 935,750 x 1,098,000 x 84,500 x 29,156 182,136 449,045 126,329 43,500 14,290 84,365 26,000 92,400 112,693 17,433 64,388 71,518 48,000 6,800 10,467 22,542 14,290 84,365 26,000 92,400 112,693 17,433 64,388 64,318 7,200 48,000 6,800 10,467 22,542 Total Manufacturing Overhead Costs: _$ 256,517 $ 387,035 Variable Warehouse Expenses: 8-1000 Salaries - Purchasing, Receiving, Inventory 8-1050 Warehouse Payroll Tax & Health Insurance 8-2000 Depreciation - Equipment/Racks 8-3000 Rent - Warehouse 8-3050 Utilities - Warehouse 136,525 21,205 18,000 20,000 12,473 Fixed 136,525 21,205 18,000 20,000 12,473 Variable Fixed 159,863 39,854 642,750 106,556 Selling and Marketing Expenses: 6-1000 Shipping 6-2000 Direct Advertising 6-3010 Sales Manager Salaries 6-3020 Sales People Commissions (% of sales) 6-3030 Sales Manager Payroll Taxes 6-3040 Sales People Payroll Taxes 6-4000 Home Office Reimbursement 6-5000 Bad Debt Expense 6-6000 Sales Managers Travel Allowance 6-7000 Sales Managers Health Insurance 54,634 159,863 39,854 642,750 106,556 54,634 9,057 30,000 37,658 120,000 12,000 9,057 30,000 37,658 120,000 12,000 Total Selling and Marketing Expenses: $ 275,476 $ 936,896 Variable 26,553 Administrative Expenses: 7-1010 Office Supplies/Postage 7-1020 Consulting 7-1030 Accounting Fees - Bank and Payroll 7-1040 Legal and Professional 7-1050 Meals & Entertainment 7-1070 Telephone/Cell Phones 7-2000 Executive Management Salaries 7-3010 Accounting Salaries 7-3020 Information System Salaries 7-4000 Human Resource Salaries 7-4020 Payroll Taxes - Administrative 7-4030 Health Insurance - Administrative 7-4040 Utilities - Administrative Office 7-4050 Rent - Administrative Office 7-4060 General Business Insurance 5,672 16,634 4,905 28,953 16,642 7,350 222,500 167,523 86,291 52,340 44,936 19,200 12,367 15,000 8,400 Fixed 5,672 16,634 4,905 2,400 16,642 7,350 222,500 167,523 86,291 52,340 44,936 19,200 12,367 15,000 8,400 Total Administrative Expenses: $ 26,553 $ 682,160 Total Period Costs: $ 302,029 $ 1,827,259 Total Company Indirect Costs (excluding direct material and direct labor): $ 558,546 $2,214,294 Actual Operating Information for the Current Year (Tasks 7 to 11): The company actually sold 592,635 pillows this year. The company actually manufactured 601,500 pillows this year. Actual direct labor hours worked making pillows this year were: Cutting Machine Operators 11,213 Assembly Machine Operators 32,615 Packing Employees 15,328 See inventory reports for information related to direct materials, work in process and finished goods. Task 8: Recording Manufacturing Costs: 1. Record the journal entries the company would have made for the year related to all product costs. Use amounts in the actual general ledger and actual information. A. Purchase direct materials B.Use direct materials to make pillows C. Transfer manufacturing overhead to manufacturing overhead control accounts D. Use direct labor to make pillows E. Apply overhead: estimate the amount of manufacturing overhead used F. Get manufacturing overhead to 0: make applied equal to actual G. Transfer the cost of completed goods to finished goods H. Record the cost of goods sold and sales A. Purchase direct materials Debit Credit Cotton Cloth - Purchases Poly Fiber Fill - Purchases Plastic Bag - Purchases Accounts Payable $0 B. Use direct materials to make pillows Debit Credit $0 Work in Process Cotton Cloth - Purchases Poly Fiber Fill - Purchases Plastic Bag - Purchases C. Transfer manufacturing overhead to manufacturing overhead control accounts Credit Debit Variable Manufacturing Overhead Fixed Manufacturing Overhead Indirect Materials Depreciation - Mfg. Equipment Machine Maintenance Utilities - Manufacturing Janitor Service - Manufacturing Plant Manager Production Supervisors (3) Payroll Taxes - Manufacturing Salaries Payroll Taxes - Manufacturing Wages Health Insurance - Mfg Employees Rent - Manufacturing Manufacturing Bldg. Property Tax & Insur. Training - Manufacturing Employees Computer Costs - Manufacturing Credit $0 D. Use direct labor to make pillows Debit Work in Process Wages - Cutting Machine Operator Wages - Assembly Machine Operator Wages - Packing E. Apply overhead: estimate the amount of manufacturing overhead used Calculate the amount of manufacturing overhead applied: Variable Fixed Total Actual Machine Hours X Rate per machine hour = MOH Applied $0 $0 Credit $0 Debit Work in Process Variable Manufacturing Overhead Fixed Manufacturing Overhead F. Get manufacturing overhead to 0: make applied equal to actual Determine the amount of manufacturing overhead over or under applied: Actual - Applied Fixed MOH Variable MOH =underl(over) $0 $0 Debit Credit Work in Process Variable Manufacturing OH Fixed Manufacturing OH G. Transfer the cost of completed goods to finished goods Determine the total cost of making products that were finished: Beginning Work In Process + Direct Material + Direct Labor + Manufacturing O/H Applied + MOH Adjustment to Actual -Ending Work In Process = Total to Finished Goods Entry B. Entry D. Entry E. Entry F. $0 Debit Credit Finished Goods Work in Process H. Record the cost of goods sold and sales Debit Credit Cost of Goods Sold Finished Goods See Task 7 Credit Debit Accounts Receivable Sales See General Ledger Actual Inventory on Hand on December 31st of the Current Year: Description 101 102 103 Quantity On Hand Cotton Fabric 110,497 Poly Fiber Fill 2.939,585 Plastic Bag 129,569 Total Direct Materials Average Cost Per: $ 1.97 $ 0.09 $ 0.13 Total Inventory $ 217,679 $ 264,563 $ 16.844 $ 499,086 Work In Process 3,427 $ 9,664 Finished Goods Pillows 154,062 $ 5.8124 $ 895,470 Total Inventory $ 1.404,220 Actual Inventory Changes in Quantity During the Current Year: Description 101 102 103 Cotton Fabric Poly Fiber Fill Plastic Bag Beginning Inventory 102,625 2,896,532 110,632 Quantity Ending Purchased Quantity Used Inventory 475,000 467,128 110,497 12,200,000 12,156,947 2,939,585 650,000 631,063 129,569 Finished Goods Pillows 145,197 601,500 592,635 154,062 Actual Inventory Changes in Dollars During the Current Year: Inventory Cotton Fabric Poly Fiber Fill Plastic Bag Dollars January 1 Purchased Dollars Used December 31 $ 202,171 $ 935,750 $ 920,242 $ 217,679 $ 260,688 $ 1,098,000 $1,094,125 $ 264,563 $ 14,382 S 84,500 $ 82,038 $ 16,844 $ 477,241 $ 2,118,250 $ 2,096,405 $ 499,086 Total Direct Materials Work In Process $ 8,329 $ 1,335 $- $ 9,664 Finished Goods $ 848,775 $ 3,496,132 $3,449,437 $ 895,470 Total Inventory $ 1,334,345 $ 5,615,717 $5,545,842 $ 1,404,220 Exhibit 2: Cost Sheet ANSWER Direct Materials: Cotton Fabric Poly Fiber Fill Plastic Bag Quantity 0.75 20.00 1.001 Cost for 1 $ 1.89 $ 0.08 $ 0.11 Total Cost $ 1.42 $ 1.60 $ 0.11 $ 3.131 Total Direct Materials: Hours Required to Direct Labor: Make 1 Pillow Cutting Machine Operator 0.03 Assembly Machine Operators (2) 0.05 Packing 0.02 Total Direct Labor Hours: 0.10 Total Machine Hours 0.08 Cost per Hour $ 16.69 $ 15.00 $ 9.00 Total Cost $ 0.50 $ 0.75 $ 0.18 $ 1.43 Manufacturing Overhead Costs: Variable Fixed Total Manufacturing Overhead Costs: Rate per Machine Hour (Task 2) $ 4.92 $ 7.47 Total Machine Hours per Unit 0.08 0.08 Total Cost $ 0.39| $ 0.60 $0.99 Total Cost to Manufacture 1 Pillow: $ 5.551 Exhibit 3: Actual General Ledger Sales: 4-1000 Sales - Pillows Actual Amount in Dollars $5,327,789 592,635 $ 8.99 Pillows each Variable MOH Fixed MOH 29,156 43,500 Manufacturing Costs: 5-1000 Cotton Cloth - Purchases 5-1020 Poly Fiber Fill - Purchases 5-1040 Plastic Bag - Purchases 5-2000 Indirect Materials (Thread & Supplies) 5-3000 Wages - Cutting Machine Operator 5-3010 Wages - Assembly Machine Operator 5-3020 Wages - Packing 5-4000 Depreciation - Manufacturing Equipment 5-4010 Machine Maintenance 5-5000 Utilities - Manufacturing 5-5050 Janitor Service - Manufacturing 5-6000 Plant Manager 5-6020 Production Supervisors 5-6060 Payroll Taxes - Manufacturing Salaries 5-6065 Payroll Taxes - Manufacturing Wages 5-6080 Health Insurance - Manufacturing Employees 5-7000 Rent - Manufacturing 5-7020 Manufacturing Bldg. Property Tax & Insurance 5-9000 Training - Manufacturing Employees 5-9050 Computer Costs - Manufacturing DM DL 935,750 x 1,098,000 x 84,500 x 29,156 182,136 449,045 126,329 43,500 14,290 84,365 26,000 92,400 112,693 17,433 64,388 71,518 48,000 6,800 10,467 22,542 14,290 84,365 26,000 92,400 112,693 17,433 64,388 64,318 7,200 48,000 6,800 10,467 22,542 Total Manufacturing Overhead Costs: _$ 256,517 $ 387,035 Variable Warehouse Expenses: 8-1000 Salaries - Purchasing, Receiving, Inventory 8-1050 Warehouse Payroll Tax & Health Insurance 8-2000 Depreciation - Equipment/Racks 8-3000 Rent - Warehouse 8-3050 Utilities - Warehouse 136,525 21,205 18,000 20,000 12,473 Fixed 136,525 21,205 18,000 20,000 12,473 Variable Fixed 159,863 39,854 642,750 106,556 Selling and Marketing Expenses: 6-1000 Shipping 6-2000 Direct Advertising 6-3010 Sales Manager Salaries 6-3020 Sales People Commissions (% of sales) 6-3030 Sales Manager Payroll Taxes 6-3040 Sales People Payroll Taxes 6-4000 Home Office Reimbursement 6-5000 Bad Debt Expense 6-6000 Sales Managers Travel Allowance 6-7000 Sales Managers Health Insurance 54,634 159,863 39,854 642,750 106,556 54,634 9,057 30,000 37,658 120,000 12,000 9,057 30,000 37,658 120,000 12,000 Total Selling and Marketing Expenses: $ 275,476 $ 936,896 Variable 26,553 Administrative Expenses: 7-1010 Office Supplies/Postage 7-1020 Consulting 7-1030 Accounting Fees - Bank and Payroll 7-1040 Legal and Professional 7-1050 Meals & Entertainment 7-1070 Telephone/Cell Phones 7-2000 Executive Management Salaries 7-3010 Accounting Salaries 7-3020 Information System Salaries 7-4000 Human Resource Salaries 7-4020 Payroll Taxes - Administrative 7-4030 Health Insurance - Administrative 7-4040 Utilities - Administrative Office 7-4050 Rent - Administrative Office 7-4060 General Business Insurance 5,672 16,634 4,905 28,953 16,642 7,350 222,500 167,523 86,291 52,340 44,936 19,200 12,367 15,000 8,400 Fixed 5,672 16,634 4,905 2,400 16,642 7,350 222,500 167,523 86,291 52,340 44,936 19,200 12,367 15,000 8,400 Total Administrative Expenses: $ 26,553 $ 682,160 Total Period Costs: $ 302,029 $ 1,827,259 Total Company Indirect Costs (excluding direct material and direct labor): $ 558,546 $2,214,294