Normal Costing and COGM, COGS, and Income Statement HarwoodCompany is a manufacturer of custom-made equipment. The companyuses a job-order costing system and applies manufacturing overheadcost to jobs on a basis of direct labor hours. At the beginning of2014, the following estimates were made as a basis for computing apredetermined overhead rate for the year: manufacturing overheadcost, $360,000; and direct labor hours, 18,000.
The following transactions took place during the year (allpurchases and services were acquired on account):
a. Raw materials were purchased for use in production,$200,000.
b. Raw materials were requisitioned for use in production (alldirect materials), $185,000.
c. Utility bills were incurred, $70,000 (90 percent related tofactory operations, and the remainder related to selling andadministrative activities).
d. Salary and wage costs were incurred: Direct labor (19,500hours) $230,000 Indirect labor 90,000 Selling and administrativesalaries 110,000
e. Maintenance costs were incurred in the factory, $51,000.
f. Advertising costs were incurred, $136,000.
g. Depreciation was recorded for the year, $95,000 (80 percentrelated to factory equipment and the remainder related to sellingand administrative equipment).
h. Rental cost incurred on buildings, $120,000 (85 percentrelated to factory operations and the remainder related to sellingand administrative facilities).
i. Sales for the year (all on account) totaled $1,200,000. Thesegoods cost $821,000 to manufacture (after adjusting for the appliedoverhead).
The balances in the inventory accounts at the beginning of theyear were:
Raw materials $30,000
Work in process 21,000
Finished goods 60,000
The balances in the inventory accounts at the ending of the yearwere:
Raw materials ?
Work in process $35,000
Finished goods 22,000
REQUIRED:
1. Prepare a schedule of cos of goods manufactured in good form,adjusting for normal costing.
2. Prepare a cost of goods sold in good form, adjusting fornormal costing.
3. Prepare an income statement for the year in good form. Ignoreincome taxes.
Normal Costing and COGM, COGS, and Income Statement HarwoodCompany is a manufacturer of custom-made equipment. The companyuses a job-order costing system and applies manufacturing overheadcost to jobs on a basis of direct labor hours. At the beginning of2014, the following estimates were made as a basis for computing apredetermined overhead rate for the year: manufacturing overheadcost, $360,000; and direct labor hours, 18,000.
The following transactions took place during the year (allpurchases and services were acquired on account):
a. Raw materials were purchased for use in production,$200,000.
b. Raw materials were requisitioned for use in production (alldirect materials), $185,000.
c. Utility bills were incurred, $70,000 (90 percent related tofactory operations, and the remainder related to selling andadministrative activities).
d. Salary and wage costs were incurred: Direct labor (19,500hours) $230,000 Indirect labor 90,000 Selling and administrativesalaries 110,000
e. Maintenance costs were incurred in the factory, $51,000.
f. Advertising costs were incurred, $136,000.
g. Depreciation was recorded for the year, $95,000 (80 percentrelated to factory equipment and the remainder related to sellingand administrative equipment).
h. Rental cost incurred on buildings, $120,000 (85 percentrelated to factory operations and the remainder related to sellingand administrative facilities).
i. Sales for the year (all on account) totaled $1,200,000. Thesegoods cost $821,000 to manufacture (after adjusting for the appliedoverhead).
The balances in the inventory accounts at the beginning of theyear were:
Raw materials $30,000
Work in process 21,000
Finished goods 60,000
The balances in the inventory accounts at the ending of the yearwere:
Raw materials ?
Work in process $35,000
Finished goods 22,000
REQUIRED:
1. Prepare a schedule of cos of goods manufactured in good form,adjusting for normal costing.
2. Prepare a cost of goods sold in good form, adjusting fornormal costing.
3. Prepare an income statement for the year in good form. Ignoreincome taxes.
Related questions
Froya Fabrikker A/S of Bergen, Norway, is a small company thatmanufactures specialty heavy equipment for use in North Sea oilfields. The company uses a job-order costing system and appliesmanufacturing overhead cost to jobs on the basis of directlabor-hours. Its predetermined overhead rate was based on a costformula that estimated $378,000 of manufacturing overhead for anestimated allocation base of 900 direct labor-hours. The followingtransactions took place during the year (all purchases and serviceswere acquired on account):
| a. | Raw materialspurchased for use in production, $285,000. |
| b. | Raw materialsrequisitioned for use in production (all direct materials),$270,000. |
| c. | Utility billswere incurred, $76,000 (85% related to factory operations, and theremainder related to selling and administrative activities). |
| d. | Salary and wagecosts were incurred: |
| Direct labor (950 hours) | $ | 315,000 |
| Indirect labor | $ | 107,000 |
| Selling and administrative salaries | $ | 195,000 |
| e. | Maintenancecosts were incurred in the factory, $71,000. |
| f. | Advertisingcosts were incurred, $153,000. |
| g. | Depreciation was recorded for the year, $89,000 (70% related tofactory equipment, and the remainder related to selling andadministrative equipment). |
| h. | Rental cost incurred on buildings, $114,000 (75% related tofactory operations, and the remainder related to selling andadministrative facilities). |
| i. | Manufacturingoverhead cost was applied to jobs, $ ?. |
| j. | Cost of goods manufactured for the year, $940,000. |
| k. | Sales for the year (all on account) totaled $2,050,000. Thesegoods cost $970,000 according to their job cost sheets. |
The balances in the inventory accounts at the beginning of theyear were: |
| Rawmaterials | $ | 47,000 |
| Workin process | $ | 38,000 |
| Finished Goods | $ | 77,000 |
| Required: |
| 1. | Prepare journal entries to record the above data. (If noentry is required for a transaction/event, select "No journal entryrequired" in the first account field.) |
| 2. | Post your entries to T-accounts. (DonΓ’ΒΒt forget to enter theopening inventory balances above.) Determine the ending balances inthe inventory accounts and in the Manufacturing Overheadaccount. |
