Ralph Rover is a small company that manufactures special heavy equipment for use

Question

Ralph Rover is a small company that manufactures special heavy equipment for use in under water oil fields. The line workers are specially trained and earn $30/hour. The company uses job order costing and applies manufacturing overhead on the basis of labor hours. At the beginning of the month, the following estimates were made: Estimated Manufacturing Overhead Costs - $330,000 Estimated Direct Labor Hours - 1,000 Beginning balances for inventory accounts were as follows: Raw Materials - $30,000 Work in Process - $261,000 Job 411 Finished Goods - $190,000 Job 410 The following transactions took place during the month (all purchases and services were acquired on account): $365,000 in raw materials were purchased Direct materials were requisitioned for use in Job 412, $80,000. Direct materials were requisitioned for use in Job 413, $70,000. The factory incurred $45,000 in utility bills. Headquarters incurred $15,000 in utility bills. The record for Job 412 indicated that 480 labor hours were used. The record for Job 413 indicated that 525 labor hours were used. Jobs 411, 412 and 413 were completed during the month. Job 410, 411 and 413 were sold during the month for $1,000,000. Advertising costs for the month were $85,000. Factory janitor salaries for the month were $5,000. The factory managers’ salaries totaled $150,000. Indirect materials requisitioned totaled $25,000. $120,000 of depreciation on the factory equipment was expensed this month. answer the following 8 questions in the spreadsheet. Then upload the file to question. How much overhead was allocated to job 412? What is the Cost of Goods Manufactured? What is the Cost of Goods Sold (before adjusting entries)? What is the period cost? How much product cost will show up on the final income statement? How much overhead was actually incurred this period? What is the net income for the period? What is the ending balance for the Finished Goods account?

Explanation / Answer

Answer 1. Predetermined Overhead Rate = $330,000 / 1,000 DLH Predetermined Overhead Rate = $330 per DLH Applied Factory Overhead - Job # 412 - 480 DLH X $330         158,400.00 Answer 2. Cost of Goods Manufactured Direct Material Material Inventory, Beginning           30,000.00 Material Purchased         365,000.00 Total Direct Material Available for Prouction         395,000.00 Less: Material Inventory, Ending       (245,000.00) Cost of Direct Materials Used in Productions    150,000.00 Direct Labor      30,150.00 Factory Overhead Applied - $330 X 1,005 hrs    331,650.00 Total Manufacturing Costs incurred in Dec    511,800.00 Add: WIP Inventory, Beginning    261,000.00 Total Manufacturing Cost    772,800.00 Less: WIP Inventory, Ending                     -   Cost of Goods Manufactured    772,800.00 Answer 3. Statement of Cost of Goods Sold On Company Finished Goods Inventory, Beginning         190,000.00 Cost of Goods Manufactured         772,800.00 Cost of Goods Available for Sale         962,800.00 Less: Finished Goods Inventory, Ending       (252,800.00) Cost of Goods Sold - Unadjusted         710,000.00 Answer 4. Period Costs - Selling & Admn. Expenses Utility Expense - Head Quarter           15,000.00 Advertising Costs           85,000.00 Total Period Cost         100,000.00 Answer 5. Total Product Cost: Cost of Goods Sold - Unadjusted         710,000.00 Underapplied Overhead           13,350.00 Total Product Cost         723,350.00 Actual Factory Overhead Utility Expense           45,000.00 Factory Janitor Sales              5,000.00 Factory Managers' Salary         150,000.00 Indirect Material           25,000.00 Depreciation - Factory Equipment         120,000.00 Total Actual Factory Overhead         345,000.00 Total Actual Factory Overhead         345,000.00 Applied Factory Overhead - 1,005 DLH X $330         331,650.00 Underapplied Overhead           13,350.00 Answer 6. Actual Factory Overhead Utility Expense           45,000.00 Factory Janitor Sales              5,000.00 Factory Managers' Salary         150,000.00 Indirect Material           25,000.00 Depreciation - Factory Equipment         120,000.00 Total Actual Factory Overhead         345,000.00 Answer 7. Income Statement Amount Sales     1,000,000.00 Less: Cost of Goods Sold - Adjusted       (723,350.00) Gross Profit         276,650.00 Less: Selling & Admn. Expense       (100,000.00) Net Income         176,650.00 Answer 8. Finished Goods Inventory - Job # 412         252,800.00

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