[FCA]Question of Account [Practic in our class]

Review Problem Job-Order Costing

Hogle Company is a manufacturing firm that uses job-order costing. On January 1, the beginning of its fiscal year, the company’s inventory balances were as follows:

Raw materials $20,000

Work in process $15,000

Finished goods $30,000

The company applies overhead cost to jobs on the basis of machine-hours worked. For the current year, the company estimated that it would work 75,000 machine-hours and incur $450,000 in manufacturing overhead cost. The following transactions were recorded for the year:

  1. Raw materials were purchased on account, $410,000.
  2. Raw materials were requisitioned for use in production, $380,000($360,000 direct and $20,000 indirect).
  3. The following costs were incurred for employee services: direct labor, $75,000; Indirect labor, $110,000; Sales commission, $90,000; and administrative salaries; $200,000.
  4. Sale travel costs were incurred, $17,000.
  5. Utility costs were incurred in the factory, $43,000
  6. Advertising costs were incurred, $180,000
  7. Depreciation was recorded for the year, $350,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).
  8. Insurance expired during the year, $10,000 (70% relates to factory operations, and the remaining 30% relates to selling and administrative activities).
  9. Manufacturing overhead was applied to production. Due to greater than expected demand for its products, the company worked 80,000 machine-hours during the year.
  10. Goods costing $900,000 to manufacture were completed during the year.
  11. Goods were sold on account to customers during the year at a total selling price of $1,500,000. The goods cost $870,000 to manufacture.
  1. Prepare journal entries to record the transactions above.
  2. Post the entries in (1) to T-accounts (don’t forget to enter the opening balances in the inventory accounts).
  3. Is Manufacturing Overhead under applied or over applied for the year? Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
  4. Prepare an income statement for the year.

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~ by Rithy Pheath on 10/23/2009.

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