QUESTIONS

Question 1.

Troy Company allocates overhead based upon machine hours. Budgeted manufacturing overhead was $525,000 and budgeted machine hours were 75,000. Actual manufacturing overhead was $558,000 and actual machine hours were 77,500.

Ending balances before proration are as follows:

Materials inventory $200,000

Finished goods inventory 90,000

The cost of goods sold 700,000

Work in process 10,000

a. Determine the budgeted manufacturing overhead rate per machine hour.

b. Compute the over/underallocated overhead.

c.Dispose the under-overallocated amount using proration based on ending balances in Work in Process, Finished Goods and Cost of Goods Sold.

d. Prepare the journal entry to dispose of the under/overallocated manufacturing overhead.

Question 2.

Brighty Company uses a job-order costing system for manufacturing parts of calculators. Summary of the transactions for the month September included:

a. Materials purchased, $50,000.

b. Direct materials used, $43,500 and indirect material used, $3,500.

c. Direct labor incurred, $26,000, wages will be paid in August.

d. Depreciation on the factory building, $17,000; maintenance expenses, $2,400; factory utilities expense, $3,600 and indirect manufacturing labor, $15,250. Utilities expense was paid in September. Maintenance and wages haven’t been paid yet.

e. Indirect manufacturing cost allocated 150% of the direct manufacturing labor costs.

f. Costs of orders completed, $106,000.

g. Costs of goods sold, $111,000.

Beginning balances on September 1 are as follows:

Materials inventory $3,000

Finished goods inventory 8,000

Work in process 1,500

Required:

a. Prepare journal entries to summarize September transactions.

b. Compute the ending inventories of direct materials, work in process and finished goods

c. Prepare a journal entry to write off the difference between allocated and actual overhead directly to cost of goods sold.

Question 3.

Consider the following data of the RM Company for the year 2004:

Administration costs 500,000

Advertising costs 300,000

Depreciation - machines 140,000

Direct manufacturing labor 1,360,000

Direct mat.erials 1/1/2004 240,000

Direct materials 31/12/2004 172,000

Direct materials purchased 1,960,000

Finished goods, 1/1/2004 420,000

Finished goods, 31/12/2004 800,000

Fire insurance - plant 60,000

Indirect manufacturing labor 172,000

Leasing costs – plant 240,000

Sales 7,000,000

Sales commissions 400,000

Sales salaries 360,000

Work In Process, 1/1/2004 60,000

Work In Process, 31/12/2004 40,000

Required:

a. Prepare a cost of goods manufactured schedule for the year.

b. Prepare an income statement for the year