B Company, which began operations on January 1 of the current year, reported the

Question

B Company, which began operations on January 1 of the current year, reported the following information: Estimated manufacturing overhead Actual manufacturing overhead Estimated direct labor cost Actual direct labor cost Total debits in the Work-In-Process account Total credits in the Finished Goods account $600,000 639,000 480,000 500,000 1,880,000 920,000 B Company uses a normal cost system and applies manufacturing overhead to jobs on the basis of direct labor cost. A 60% markup is added to the cost of completed production when finished goods are sold. On December 31, job no. 18 was the only job that remained in production. That job had direct-material and direct-labor charges of $16,500 and $36,000, respectively Determine the company's predetermined overhead rate Determine the amount of under- or overapplied overhead Compute the amount of direct materials used in production. Calculate the balance the company would report as ending work- in-process inventor)y Prepare the journal entries needed to record B Company's sales, which are all made on account. Required: a) b) c) d) e)

Explanation / Answer

a) predetermined overhead rate Estimated manufacturing overhead/Estimated direct labor cost 600,000/480,000 125.00% answer 125% of direct labor cost b) Actual manufacturin overhead 639,000 Applied overhead (500,000*120%) 600000 overhead under applied 39,000 answer c) total debits in work in process account 1,880,000 Direct labor cost 500,000 Applied overhead 600,000 1,100,000 Direct materials used in prodcution 780,000 answer d) Ending work in process (job no 18) direct material 16,500 direct labor 36,000 overhead applied (36000*125%) 45000 Ending work in process 97,500 answer e) General Journal Debit Credit Account receivable 1472000 sales (920,000*160%) 1472000 cost of goods sold 920,000 Finished goods inventory 920,000

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