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 $4,200,000 direct labour hours 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 Job 401 Job 402 Job 403 Job 404 iv) Issued indirect materials to production, $8o,000 Direct Materials Direct Labour | Direct Labour Hours $100,000 81,000 90,000 150,000 $220,000 1,200 190,000 205.000 290,250 1,000 1.100 1,800 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 iventory account x) Shipped Job 401 and 402 and billed customers at a margin of 25% on cost. Required: a) Compute Bags R Us' predetermined manufacturing overhead rate. b) Calculate the total manufacturing cost for each job. c) Using the total figures, record the transactions in the general journal. d) 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. e) What is the balance in the Cost of Goods Sold account after the adjustment? ) Calculate the gross profit earned by Bags R Us for the month. g) Open T-accounts for Work in Process Inventory and Finished Goods Inventory. Post the appropriate entries to these accounts & determine the ending account balances. Assume that the beginning balances were zero.
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 $4,200,000 direct labour hours 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 Job 401 Job 402 Job 403 Job 404 iv) Issued indirect materials to production, $8o,000 Direct Materials Direct Labour | Direct Labour Hours $100,000 81,000 90,000 150,000 $220,000 1,200 190,000 205.000 290,250 1,000 1.100 1,800 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 iventory account x) Shipped Job 401 and 402 and billed customers at a margin of 25% on cost. Required: a) Compute Bags R Us' predetermined manufacturing overhead rate. b) Calculate the total manufacturing cost for each job. c) Using the total figures, record the transactions in the general journal. d) 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. e) What is the balance in the Cost of Goods Sold account after the adjustment? ) Calculate the gross profit earned by Bags R Us for the month. g) Open T-accounts for Work in Process Inventory and Finished Goods Inventory. Post the appropriate entries to these accounts & determine the ending account balances. Assume that the beginning balances were zero.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![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 $4,200,000
direct labour hours
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
Job 401
Job 402
Job 403
Job 404
iv) Issued indirect materials to production, $8o,000
Direct Materials Direct Labour | Direct Labour Hours
$100,000
81,000
90,000
150,000
$220,000
1,200
190,000
205.000
290,250
1,000
1.100
1,800
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 iventory account
x) Shipped Job 401 and 402 and billed customers at a margin of 25% on cost.
Required:
a) Compute Bags R Us' predetermined manufacturing overhead rate.
b) Calculate the total manufacturing cost for each job.
c) Using the total figures, record the transactions in the general journal.
d) 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.
e) What is the balance in the Cost of Goods Sold account after the adjustment?
) Calculate the gross profit earned by Bags R Us for the month.
g) Open T-accounts for Work in Process Inventory and Finished Goods Inventory. Post the
appropriate entries to these accounts & determine the ending account balances. Assume that
the beginning balances were zero.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F376be004-a3ba-413b-a9c1-a7fb6691656a%2Fc8106e94-70fc-4a14-aee6-ed27d5541a12%2Fql42xm_processed.png&w=3840&q=75)
Transcribed Image Text: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 $4,200,000
direct labour hours
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
Job 401
Job 402
Job 403
Job 404
iv) Issued indirect materials to production, $8o,000
Direct Materials Direct Labour | Direct Labour Hours
$100,000
81,000
90,000
150,000
$220,000
1,200
190,000
205.000
290,250
1,000
1.100
1,800
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 iventory account
x) Shipped Job 401 and 402 and billed customers at a margin of 25% on cost.
Required:
a) Compute Bags R Us' predetermined manufacturing overhead rate.
b) Calculate the total manufacturing cost for each job.
c) Using the total figures, record the transactions in the general journal.
d) 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.
e) What is the balance in the Cost of Goods Sold account after the adjustment?
) Calculate the gross profit earned by Bags R Us for the month.
g) Open T-accounts for Work in Process Inventory and Finished Goods Inventory. Post the
appropriate entries to these accounts & determine the ending account balances. Assume that
the beginning balances were zero.
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