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Cost Exercise On Job Order

Sea Voyager Corporation uses a job-order costing system to assign overhead to jobs. The predetermined overhead rate is $1,464,000/73,200 machine hours or $20 per machine hour. Journal entries are required to record various purchases, expenses, and production activity for the month of April.

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23 views3 pages

Cost Exercise On Job Order

Sea Voyager Corporation uses a job-order costing system to assign overhead to jobs. The predetermined overhead rate is $1,464,000/73,200 machine hours or $20 per machine hour. Journal entries are required to record various purchases, expenses, and production activity for the month of April.

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kennaa701
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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2.

Sea Voyager Corporation manufactures outboard motors and an assortment of other


marine equipment. The company uses a job-order costing system. Normal costing is
used, and manufacturing overhead is applied on the basis of machine hours.
Estimated manufacturing overhead for the year is $1,464,000 and management
expects that 73,200 machine hours will be used.
Required:
(1) Calculate the company’s predetermined overhead rate for the year.
(2) Prepare journal entries to record the following events, which occurred
during April.

a. The firm purchased marine propellers from Martin Marine Corporation for $7,850
on account.
b. A requisition was filed by the Gauge Department supervisor for 300 pounds clear
plastic, which is considered as direct material. The material cost $0.60per pound
when it was purchased.
c. The Motor Testing Department supervisor requisitioned 300 feet of electrical
wire, which is considered an indirect material. The wire cost $0.10 per foot when
it was purchased.
d. An electric utility bill for factory of $800 was paid in cash.
e. Direct-labor costs incurred in April were $75,000.
f. April’s insurance cost was $1,800 for insurance on the cars driven by sales
personnel. The policy had been prepaid in March.
g. Metal tubing costing $3,000 was purchased on account.
h. A cash payment of $1,700 was made on outstanding accounts payable.
i. Depreciation on factory equipment for April amounted to $7,000.
j. Indirect labor costs of $21,000 were incurred during April.
k. Job number G22, consisting of 50 tachometers was finished during April. The total cost of the
job was $1,100.
l. During April 7,000 machine hours were used.
m. Sales on account for April amounted to $176,000. The cost of goods sold in April was
$139,000.

3. The following data refers to Franconia Corporation for the year 2004.

Sales Revenue ……………………………………………………… $2,105,000


Raw-material Inventory, 12/31/03……………………………………. 89,000
Purchase of raw materials in 2004………………………………………..731,000
Raw-material inventory, 12/31/04………………………………………… 59,000
Direct labor cost incurred…………………………………………………..474,000
Selling & Administrative expenses………………………………………269,000
Indirect labor cost incurred………………………………………………...150,000
Property taxes on factory……………………………………………………90,000
Depreciation on factory building…………………………………………..125,000
Income tax expense………………………………………………………… 25,000
Indirect material used………………………………………………………..45,000
Depreciation on factory equipment……………………………………….60, 000
Insurance on factory & equipment………………………………………… 40,000
Utilities for factory………………………………………………………… 70,000
Work-in Process inventory, 13/31/03………………………………………. 0
Work-in Process inventory, 12/31/04……………………………………….40,000
Finished-Goods inventory, 12/31/03………………………………………..35,000
Finished-Goods inventory, 12/31/04………………………………………40,000
Applied manufacturing overhead…………………………………………..577,500
Required:

A, Prepare Franconia’s schedule of cost of goods manufactured.

B,Prepare Franconia’s schedule of cost of goods sold for 2004. The company closes overapplied
or underapplied overhead into cost of goods sold.

C. Prepare Franconia’s income statement for 2004

4. Film Specialists Inc., operates a small production studio in which advertising films
are made for TV and other uses. The company uses a job-order costing system to
accumulate costs for each film produced. The company trial balance as of May 1,
the start of its fiscal year, is given as follows:
Cash…………………………………………………$60,000
Accounts Receivable……………………………… 210,000
Materials and Supplies………………………………130, 000
Film in Process……………………………………… 75,000
Finished Films……………………………………… 860,000
Prepaid Insurance…………………………………… 90,000
Studio & Equipment………………………………..5,200,000
Accumulated Depreciation……………………………………..…1, 990,000
Accounts Payable…………………………………………………..700,000
Salaries and Wages Payable………………………………………... 35,000
Capital stock………………………………………………….……2,500,000
Retained Earnings…………………………………………….…....1,400,000

Total $6,625,000 $6,625,000

Film Specialists Inc. uses a production overhead account to record all transactions
relating to overhead costs and applies overhead costs o to jobs on the basis of camera
hours. For the current year, the company estimated that it would incur $1,350,000 in
production overhead costs, and film 15,000 camera hours. During the year, the following
transactions were completed:

a. Materials and supplies purchased on account, $690,000.


b. Materials and supplies issued from storeroom for use in production of various
films, $700,000 (80% direct to the films and 20% indirect)
c. Utility costs incurred in the production studio, $90,000.
d. Costs for employee salaries and wages were incurred as follows:
Actors, directors, and camera crew………..$ 1,300,000
Indirect labor costs of support workers………….230, 000
Marketing and administrative salaries………….650, 000

e. Advertising costs incurred $800,000.


f. Prepaid insurance expired during the year, $70,000. Of this amount, $60,000
related to the operation of the production studio, and $10,000 to the company’s
marketing and administrative activates.
g. Depreciation recorded for the year, $650,000 (80% represent deprecation for
production and 20% for marketing and administrative activities).
h. Rental cots incurred on various facilities and equipment used in production of
films, $360,000; and rental costs incurred in marketing and administrative,
$40,000.
i. Production overhead was applied on jobs filmed during the year. The company
recorded 16,500 camera hours.
j. Films that cost $3,400,000 to produce according to their job cost sheets were
completed during the year.
k. Sales of films for the year (all on account) totaled $6,000,000. The total costs to
produce these films were $4,000,000 according to their job cost sheets.
l. Collections on account from customers during the year, $ 5,400,000.
m. Cash payments made during the year, to creditors on account, $2,500,000; and to
employees for salaries and wages, $2,200,000

Required:
1. Prepare journal entries to record the year’s transactions.
2. Prepare a T-account for each account in the company’s trial balance and
enter the opening balances given above. Post your journal entries and
determine the ending balance in each account.
3. Is production overhead underapplied or overapplied? Prepare the
necessary journal entry to close the balance to COGS.
4. Prepare an income statement for the year.( Do not prepare a schedule of
cost of goods manufactured.)

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