Overhead Cost ABC Company manufactured 100,000 units in 2014 and reported the fo
ID: 2466430 • Letter: O
Question
Overhead Cost
ABC Company manufactured 100,000 units in 2014 and reported the following actual costs
Sandpaper $ 32,000
Leasing costs - plant $ 384,000
Materials handling (specialist) 320,000
Depreciation - equipment 224,000
Coolants & lubricants 22,400
Property taxes - equipment 32,000
Indirect manufacturing labor 275,200
Fire insurance - equipment 16,000
Direct manufacturing labor (general) ?
Direct material purchases 3,136,000
Direct materials, 1/1/2014 384,000
Direct materials, 12/31/2014 275,200
Finished goods, 1/1/2014 672,000
Sales revenue 12,800,000
Finished goods, 12/31/2014 1,280,000
Sales commissions 640,000
Work-in-process, 1/1/2014 96,000
Sales salaries 576,000
Work-in-process, 12/31/2014 64,000
Advertising costs 480,000
Administration costs 800,000
Other Relevant Information
The company used normal costing system and allocated the indirect cost based on direct labor cost.
Each unit required 2 hours of direct labor, the rate per hour is $10.88.
All purchases were on credit.
All salaries were accrued.
Material handling cost were performed by specialist workers.
Leasing costs are considered operational.
Fire insurance are paid in a monthly basis.
All other disbursement were paid in cash.
The amounts are totally and belong for 1 year.
Predetermine tax rate.
Required:
Using the information above, prepare all the necessary Journal Entries to record the Indirect Manufactured Cost for 2014.
Compute the amount of under or overallocated manufacturing overhead.
Explanation / Answer
Journal entries are recorded as under:
Date Particulars l.F Amount ($) Amount ($) a. Raw Material inventory 31,36,000 Accounts Payable 31,36,000 (For raw material purchased on account) b. Work in Process 32,44,800 Raw material Inventory 32,44,800 (For raw material issued to production) (384,000+ 3136000-275,200) c. Work in Process 21,76,000 Manufacturing Overhead 2,75,200 Salaries and wages payable 24,51,200 (For labour cost incurred) 100,000*2*10.88 d. Manufacturing Overhead 7,36,000 Cash 18,000 (For sandpaper cost, leasing cost and material handling cost recorded) e. Sales salaries 5,76,000 Cash 5,76,000 (For accrued sales salaries) f. Advertising expense 4,80,000 Cash 4,80,000 (For advertising costs incurred) g. Administration Cost 8,00,000 Cash 8,00,000 (For administration costs incurred) h. Sales commissions 6,40,000 Cash 6,40,000 (For sales commissions incurred) i. Depreciation - equipment 224000 Coolants & lubricants 22400 Property taxes - equipment 32,000 Fire insurance - equipment 16,000 Cash 1,00,000 (For expenses recorded) j. Work in process 10,11,200 Manufacturing overhead 10,11,200 (For manufacturing overhead applied to production) k. Finished goods 64,64,000 Work in process 64,64,000 (For completed orders transferred to finished goods) l. Cost of goods sold 58,56,000 Finished goods 58,56,000 (For completed orders shipped) m. Accounts Receivable 128,00,000 Sales 128,00,000 (For goods sold on account)Related Questions
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