Mariya Company uses a job-order costing system and applies manufacturing overhea
ID: 2569015 • Letter: M
Question
Mariya Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of direct materials used in production. Its predetermined overhead rate was based on a cost formula that estimated $280,000 of manufacturing overhead for an estimated allocation base of $175,000 direct material dollars The following transactions took place during the year (all purchases and services were acquired on account) a. Raw materials purchased, $162,000 b. Raw materials requisitioned for use in production (all direct materials), $158,000 c. Utility bills incurred in the factory, $41,000 d. Costs for salaries and wages were incurred as follows Direct labor Indirect labor Seling and administrative salaries $ 160,000 $257,000 $ 70,200 e. Maintenance costs incurred in the factory, $25,500 f. Advertising costs incurred, $145,000 g. Depreciation recorded for the year, $60,000 (70% relates to factory assets, and the remainder relates to selling and administrative assets). Rental cost incurred on buildings, $102,000 (80% of the space is occupied by the factory, and 20% is occupied by sales and administration). i. Miscellaneous selling and administrative costs incurred, $19,500 j. Manufacturing overhead cost was applied to jobs, $ 2. k. Cost of goods manufactured for the year, $630,000 l. Sales for the year (all on account) totaled $1,270,000. These goods cost $615,000 according to their job cost sheets The balances in the inventory accounts at the beginning of the year were as follows Raw materials Work in process Finished Goods $ 40,000 $41,000 $51,000Explanation / Answer
Journal Entries
Raw Material A/c Debit $40,000
WIP A/c Debit $41,000
Finished Goods A/cDebit $ 51,000
Opening Invetory A/c credit $132,000
(Allocation of opening inventory to thier head)
a. Raw Material A/c Debit $162,000
Account Payable A/c Credit $162,000
(Purchase of Raw Material)
b. WIP - Direct Material Debit $158,000
Raw Material A/c Credit $158,000
(Issue of raw (direct) material for production process)
c. Manufacturing Overhead A/c Debit $41,000
Cash/Bank A/c Credit $41,000
(Payment of electricity bill)
d.i. WIP - Direct Labour A/c Debit $257,000
Cash / Bank A/c Credit $257,000
ii. Manufacturing Overhead - Indirect Labour A/c Debit $70,200
Cash / Bank A/c Credit $70,200
iii. Selling & Distribution a/c debit $160,000
Cash / Bank A/c Credit $160,000
e. Manufacturing Overhead A/c debit $25,500
Cash/Bank A/c Credit $25,500
f. Advertisement Expences A/c Debit $145,000
Cash/Bank A/c Credit $145,000
g. Manufacturing Overhead a/c debit $42,000
Deprecialtion A/c Debit $18000
Fixed Asset A/c Credit $70,000
(Depreciation expence 70% related to Manufacturing & Rest as general)
h. Manufacturing Overhead a/c debit $81,600
Building Rent A/c Debit $20,400
Building Tenant A/c Credit $102,000
(Building Rent expence 80% related to Manufacturing & Rest as general)
i. Selling & Distrubution A/c Debit $ 19,500
Cash & Bank A/c Credit $19,500
(Misc Expecnes )
j. WIP - A/c Debit $252,800
Manufactuing Overhead A/c Credit $ 252,800
(allocation of Manufacturing overhead to production)
k. Finished Goods a/c debit $630,000
WIP a/c credit $630,000
(Finished good prepared and ready to sale)
l. Cash / bank a/c debit $1270,000
Sales - Finished Good A/c Credit $615,000
Profit on sales a/c credit $655,000
(Sales of Finished goods)
m. Closing Inventory A/c Debit $188,800
Finished Goods a/c credit $66,000
WIP A/c Credit $78,800
Raw Material A/c Credit $ 44,000
(Closing Inventory at the end of year)
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