Chrome-It, Inc., manufactures special chromed parts made to the order and specifications of the customer. It has two production departments, stamping and plating, and two service departments, power and maintenance. In any production department, the job in process is wholly completed before the next job is started. The company operates on a fiscal year, which ends September 30. Following is the post-closing trial balance as of September 30:
Cash 22,500
Accounts Receivable 21,700
Finished Goods 8,750
Work in Process 3,600
Materials 15,000
Prepaid Insurance 4,320
Factory Building 64,000
Accum.Depr. - Factory Building 22,500
Machinery and Equipment 38,000
Accum.Depr. - Machinery and Equipment 16,000
Office Equipment 10,500
Accum.Depr. - Office Equipment 7,500
Accounts Payable 2,500
FICA Tax payable 3,120
Federal Unemployment Tax Payable 364
State Unemployment Tax Payable 1,404
Employees Income Tax Payable 5,200
Capital Stock 75,000
Retained Earnings 54,782
8,370 188,370
Additional information:
1. The balance of the materials account represents the following:
Materials Units Unit cost Total
A 120 $25 $3,000
B 320 15 4,800
C 180 30 5,400
Factory Supplies 1,800
$15,000
The company uses the FIFO method of accounting for all inventories. Material A is used in the stamping department, and materials B and C are used in the plating department.
2. The balance of the work in process account represents the following costs that are applicable to Job 905. (The customer's order is for 1,000 units of the finished product.)
Direct materials $1,500
Direct Labor 1,200
FOH 900
$3,600
3. The finished goods account reflects the cost of Job 803, which was finished at the end of the preceding month and is awaiting delivery orders from the customer.
4. At the beginning of the year, factory overhead application rates were based on the following data:
Stamping Dept. Plating Dept.
Estimated FOH for the year $145,000 $115,500
Estimated direct labor hours for the year 29,000 6,000
In October, the following transactions were recorded:
a) Purchased the following materials and supplies on account:
Material A 1,100 units @ $26
Material B 900 units @ $17
Material C 800 units @ $28
Factory Supplies $3,200
b) The following materials were issued to the factory:
Job 905 Job 1001 Job 1002
Material A 600 units 400 units
Material B 400 units 200 units
Material C 200 units 400 units
Factory Supplies.....$2,450
Customers' orders covered by Jobs 1001 and 1002 are for 1,000 and 500 units of finished product, respectively.
c) Factory wages and office, sales, and administrative salaries are paid at the end of each month. The following data, provided from an analysis of labor-time records and salary schedules, will be sufficient for the preparation of the entries to record the payroll. (Assume FICA and federal income tax rates of 8% and 10%, respectively.) Record the company's liability for state and federal unemployment taxes. (Assume rates of 4% and 1% respectively.) Record the payroll distribution for the month of October.
Stamping Dept. Plating Dept.
Job 905 100 hr. @ $9 300 hr. @ $11
Job 1001 1,200 hr. @ $9 300 hr. @ $11
Job 1002 800 hr. @ $9
Wages of the supervisors, custodial personnel, etc., totaled $9,500; administrative salaries were $18,300.
d) Miscellaneous factory overhead incurred during October totaled $4,230. Miscellaneous selling and administrative expenses were $1,500. These items as well as the FICA tax and federal income tax withheld for September were paid. (See account balances on the post-closing trial balance for September 30.)
e) Annual depreciation on the plan assets is calculated using the following rates:
Factory buildings - 5%
Machinery and Equipment - 20%
Office equipment - 20%
f) The balance of the prepaid insurance account represents a 3-year premium for a fire insurance policy covering the factory building and machinery. It was paid on the last day of the preceding month and became effective on October 1.
g) The summary of factory overhead prepared from the factory overhead ledger is reproduced here:
Transaction Account Stamping Plating Power Maintenance Total
a. Factory Supplies $ 940.00 $ 750.00 $260.00 $ 500.00 $2,450.00
b. Indirect labor 3,780.00 2,860.00 970.00 1,890.00 9,500.00
c. Payroll Taxes 2,948.40 1,229.80 126.10 245.70 4,550.00
d. Miscellaneous 1,692.00 1,410.00 752.00 376.00 4,230.00
e. Depreciation 360.00 270.00 90.00 180.00 900.00
f. Insurance 48.00 40.00 16.00 16.00 120.00
Total $9,768.40 $6,559.80 $2,214.10 $3,207.70 $21,750.00
h) The total expenses of the maintenance department are distributed on the basis of floor space occupied by the power department (8,820 sq. ft.), stamping department (19,500 sq. ft.), and plating department (7,875 sq. ft.) The power department expenses are then allocated equally to the stamping and plating departments.
i) After the actual factory overhead expenses have been distributed to the departmental accounts and the applied factory overhead has been recorded and posted, any balances in the departmental accounts are transferred to Under-and Over-applied Overhead.
j) Jobs 905 and 1001 were finished during the month. Job 1002 is still in process at the end of the month.
k) During the month, Jobs 803 and 905 were sold at a markup of 150% of cost.
l) Received $55,500 from customers in payment of their accounts.
m) Checks were issued in the amount of $43,706 for payment of the payroll.
Required:
1. Set up the beginning trial balance in T-accounts
2. Prepare materials inventory ledger cards and enter October 1 balances.
3. Set up job cost sheets as needed.
4. Record all transactions and related entries for the month of October and post to T-accounts.
5. Prepare a service department expense distribution worksheet for October.
6. At the end of the month:
a. Analyze the balance in the materials account, the work in process account, and the finished goods account.
b. Prepare the statement of cost of goods manufactured, income statement, and balance sheet for October 31.