Gold Nest Company of Guandong, China, is a family-owned enterprise that makes bi

Question

Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. All of the company’s transactions with customers, employees, and suppliers are conducted in cash; there is no credit. The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $92,000 of manufacturing overhead for an estimated activity level of $40,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Raw materials $ 10,100 Work in process $ 4,800 Finished goods $ 8,700 During the year, the following transactions were completed: a. Raw materials purchased for cash, $165,000. b. Raw materials requisitioned for use in production, $147,000 (materials costing $122,000 were charged directly to jobs; the remaining materials were indirect). c. Costs for employee services were incurred as follows: Direct labor $ 171,000 Indirect labor $ 311,200 Sales commissions $ 29,000 Administrative salaries $ 47,000 d. Rent for the year was $18,800 ($13,600 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $14,000. f. Advertising costs incurred, $12,000. g. Depreciation recorded on equipment, $24,000. ($15,000 of this amount was on equipment used in factory operations; the remaining $9,000 was on equipment used in selling and administrative activities.) h. Manufacturing overhead cost was applied to jobs, $? i. Goods that had cost $226,000 to manufacture according to their job cost sheets were completed. j. Sales for the year totaled $511,000. The total cost to manufacture these goods according to their job cost sheets was $217,000.

Explanation / Answer

Journal Entry Date Particulars Dr Amt Cr Amt 1 Raw Material                                    Dr.          165,000    To Cash          165,000 2 WIP                                                      Dr.          122,000 Manufacturing Overhead           Dr.            25,000    To Raw Materials          147,000 3 WIP                                                      Dr.          171,000 Manufacturing Overhead           Dr.          311,200 Sales Comm. Exp                           Dr.            29,000 Salaries Exp.                                    Dr.            47,000    To Cash          558,200 4 Manufacturing Overhead           Dr.            13,600 Rent Exp.                                           Dr.              5,200    To Cash            18,800 5 Manufacturing Overhead           Dr.            14,000    To Cash            14,000 6 Advertising Exp.                              Dr.            12,000    To Cash            12,000 7 Manufacturing Overhead           Dr.            15,000 Dep. Exp.                                           Dr.              9,000    To Accumulated Dep.            24,000 8 WIP                                                      Dr.          393,300    To Manufacturing Overhead          393,300 Predetermined Overhead Rate = $92000 (estimated MOH) / $40000 (Estimated DL) Predetermined Overhead Rate = 230% of DLC Applied MOH = $171000 (DLC) X 230% = $393300 9 Finished Goods                              Dr.          226,000    To WIP          226,000 10 Cash                                                    Dr.          511,000    To Sales          511,000 11 Cost of Goods Sold                       Dr.          217,000 To Finished Goods          217,000

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.