Bags R Us manufactures back packs for schools. The business uses a perpetual inventory system and has a highly labour intensive production process, so it applies manufacturing overhead based on direct labour hours. Any overhead variance is closed out to Cost of Goods Sold. The business’s pre-determined overhead application rate for 2018 was computed from the following data: Total estimated factory overheads Total estimated direct labour hours $4,200,000 35,000 During the first month of 2018, the business recorded the following transactions. i) Purchased materials on account, $500,000 ii) Incurred manufacturing wages of $1,065,000 iii) Issued direct materials and used direct labour in manufacturing Direct Materials Direct Labour Direct Labour Hours Job 401 $100,000 $220,000 1,200 Job 402 81,000 190,000 1,000 Job 403 90,000 205,000 1,100 Job 404 150,000 290,250 1,800 iv) Issued indirect materials to production, $80,000 v) Charged indirect manufacturing wages to production, $159,750 vi) Depreciation expense on factory equipment used on the different jobs, $300,000 vii) Other overhead costs incurred on jobs 401 to 404 amounted to $112,750 viii)Applied factory overhead to the various jobs using the pre-determined factory overhead rate. ix) Finished Jobs 401 – 403 and transferred to the finished goods inventory account x) Shipped Job 401 and 402 and billed customers at a margin of 25% on cost. 1)Post the manufacturing overhead transactions to the manufacturing overhead T-account and state the balance on the account before closing the account. Show the journal entries necessary to dispose of this variance
Bags R Us manufactures back packs for schools. The business uses a perpetual inventory system
and has a highly labour intensive production process, so it applies manufacturing overhead based
on direct labour hours. Any overhead variance is closed out to Cost of Goods Sold.
The business’s pre-determined overhead application rate for 2018 was computed from the
following data:
Total estimated factory
Total estimated direct labour hours
$4,200,000
35,000
During the first month of 2018, the business recorded the following transactions.
i) Purchased materials on account, $500,000
ii) Incurred manufacturing wages of $1,065,000
iii) Issued direct materials and used direct labour in manufacturing
Direct Materials Direct Labour Direct Labour Hours
Job 401 $100,000 $220,000 1,200
Job 402 81,000 190,000 1,000
Job 403 90,000 205,000 1,100
Job 404 150,000 290,250 1,800
iv) Issued indirect materials to production, $80,000
v) Charged indirect manufacturing wages to production, $159,750
vi)
vii) Other overhead costs incurred on jobs 401 to 404 amounted to $112,750
viii)Applied factory overhead to the various jobs using the pre-determined factory overhead rate.
ix) Finished Jobs 401 – 403 and transferred to the finished goods inventory account
x) Shipped Job 401 and 402 and billed customers at a margin of 25% on cost.
1)Post the manufacturing overhead transactions to the manufacturing overhead T-account and state the balance on the account before closing the account. Show the
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