1) The Collins Corporation uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of materials used in production. At the beginning of the most recent year, the following estimates were made as a basis for computing the predetermined overhead rate for the year: manufacturing overhead cost, $200,000; direct materials cost, $160,000. The following transactions took place during the year (all purchases and services were acquired on account): a. Raw materials were purchased, $86,000. b. Raw materials were requisitioned for use in production (all direct materials), $98,000. c. Utility costs were incurred in the factory, $15,000. d. Salaries and wages were incurred as follows: Direct labor Indirect labor Selling and administrative salaries $175,000 $70,000 $125,000 e. Maintenance costs incurred in the factory, $15,000. f. Advertising costs incurred, $89,000. g. Depreciation recorded for the year, $80,000 (80% relates to factory assets and the remainder relates to selling, general, and administrative assets). h. Rental cost incurred on buildings, $70,000, (75% of the space is occupied by the factory, and 25% is occupied by sales and administration). i. Miscellaneous selling, general, and administrative costs incurred, $11,000. j. Manufacturing overhead cost was applied to jobs as per company policy. k. Cost of goods manufactured for the year, $500,000. 1. Sales for the year totaled $1,000,000. These goods cost $600,000 to produce. Required: Prepare journal entries for each of the above transactions. Assume that all transactions with external suppliers, employees, and customers were conducted in cash. Prepare an Income Statement in good format.
1) The Collins Corporation uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of materials used in production. At the beginning of the most recent year, the following estimates were made as a basis for computing the predetermined overhead rate for the year: manufacturing overhead cost, $200,000; direct materials cost, $160,000. The following transactions took place during the year (all purchases and services were acquired on account): a. Raw materials were purchased, $86,000. b. Raw materials were requisitioned for use in production (all direct materials), $98,000. c. Utility costs were incurred in the factory, $15,000. d. Salaries and wages were incurred as follows: Direct labor Indirect labor Selling and administrative salaries $175,000 $70,000 $125,000 e. Maintenance costs incurred in the factory, $15,000. f. Advertising costs incurred, $89,000. g. Depreciation recorded for the year, $80,000 (80% relates to factory assets and the remainder relates to selling, general, and administrative assets). h. Rental cost incurred on buildings, $70,000, (75% of the space is occupied by the factory, and 25% is occupied by sales and administration). i. Miscellaneous selling, general, and administrative costs incurred, $11,000. j. Manufacturing overhead cost was applied to jobs as per company policy. k. Cost of goods manufactured for the year, $500,000. 1. Sales for the year totaled $1,000,000. These goods cost $600,000 to produce. Required: Prepare journal entries for each of the above transactions. Assume that all transactions with external suppliers, employees, and customers were conducted in cash. Prepare an Income Statement in good format.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:1) The Collins Corporation uses a job-order costing system and applies manufacturing
overhead cost to jobs on the basis of the cost of materials used in production. At the beginning
of the most recent year, the following estimates were made as a basis for computing the
predetermined overhead rate for the year: manufacturing overhead cost, $200,000; direct
materials cost, $160,000. The following transactions took place during the year (all purchases
and services were acquired on account):
a. Raw materials were purchased, $86,000.
b. Raw materials were requisitioned for use in production (all direct materials), $98,000.
c. Utility costs were incurred in the factory, $15,000.
d. Salaries and wages were incurred as follows:
Direct labor
Indirect labor
Selling and administrative
salaries
$175,000
$70,000
$125,000
e. Maintenance costs incurred in the factory, $15,000.
f. Advertising costs incurred, $89,000.
g. Depreciation recorded for the year, $80,000 (80% relates to factory assets and the remainder
relates to selling, general, and administrative assets).
h. Rental cost incurred on buildings, $70,000, (75% of the space is occupied by the factory, and
25% is occupied by sales and administration).
i. Miscellaneous selling, general, and administrative costs incurred, $11,000.
j. Manufacturing overhead cost was applied to jobs as per company policy.
k. Cost of goods manufactured for the year, $500,000.
1. Sales for the year totaled $1,000,000. These goods cost $600,000 to produce.
Required:
Prepare journal entries for each of the above transactions. Assume that all transactions with
external suppliers, employees, and customers were conducted in cash. Prepare an Income
Statement in good format.
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