Reference no: EM132507873

Oil field Equipment company is a small company that manufactures specialty heavy equipment for use in Alberta oil-fields. The company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the direct labour-hours. At the beginning of the current year, the following estimates were made to compute the predetermined overhead rate: manufacturing overhead cost, 360,000, and 900 direct labour-hours.

The following transactions took place during the year (all purchases purchases and services were acquired on account):

a. Raw materials were purchased for use in production: $200,000

b. Raw materials were requisitioned for use in production (all direct materials): $185,000

c. Utility bills were incurred in the factory: $70,000 (90% related to factory operations and the remaining to administrative activities).

d. Costs for salaries and wages were incurred as follows:

Direct labour (975 hours).................................$230,000
Indirect labour..................................................$90,000
selling and administrative salaries.................. $110,000
e. Maintenance costs were incurred in the factory: $54,000

f. Advertising costs were incurred: $136,000

g. Depreciation was recorded for the year: $95,000 (80% relates to factory operations and the remainder relates to selling and admin equipment)

I. Manufacturing overhead cost was applied to jobs: $_______?

j. cost of goods manufactured for the year was $770,000

k. sales for the year (all on account) totalled $1,200,000. These goods cost $800,000 according to their job cost sheets.

The balance in the inventory accounts at the beginning of the year were as follows:

Raw materials.....................$30,000
Work in process..................$21,000
Finished goods...................$60,000

Required:

Question 1: Prepare journal entries to record above data.

Question 2: Post your entries to T-accounts (Don't forget to enter opening inventory balance above.) Determine the ending balances in the inventory accounts and in the manufacturing overhead account.

Question 3: Create a schedule of cost of goods manufactured

Question 4: Create a journal entry to properly dispose of any balance in the Manufacturing overhead account. Create a schedule of costs of goods sold.