Elite Home Decor manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labor-intensive production process, so it assigns manufacturing overhead based on direct labor costs. Elite expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labor costs of $3,150,000 during 2020. At the end of December 2019, Elite reported work in process inventory (Job 551) of $93,000 The following events occurred during January - March 2020.   Purchased materials on account, $392,000 Incurred manufacturing wages of $400,000  Requisitioned direct materials and used direct labor in manufacturing 4.  Issued indirect materials to production, $30,000 5.Charged indirect manufacturing wages to production, $60,000 6.Depreciation of production machinery, $85,000 7. Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000 8.Allocated overheads to jobs at the predetermined rate 9.  Units completed: 551, 552 & 554 10. Sold units 551 & 554 (billed customers at a margin of 33⅓%     on sales)   Direct Materials  Direct Labour  Job 551 Job 552 Job 553 Job 554 $70,200 97,500 105,300  117,000                       $61,200 115,600 78,200 85,000         Required: (a) Compute Elite’s predetermined manufacturing overhead rate for 2020.  (b) Calculate the total manufacturing costs for each job. (c) Using the total figures, record the above transactions in the general journal. (d) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account, clearly showing the balance before closing the account. State the journal entries necessary to dispose of the variance. Assume that the manufacturing overhead variance is immaterial. (e) What is the balance in the Cost of Goods Sold account after the adjustment?  (f) Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead variance (g) Post the appropriate entries to the Work in Process Inventory account & determine the account balance on March 31, the end of the quarte

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Elite Home Decor manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labor-intensive production process, so it assigns manufacturing overhead based on direct labor costs. Elite expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labor costs of $3,150,000 during 2020.

At the end of December 2019, Elite reported work in process inventory (Job 551) of $93,000

The following events occurred during January - March 2020.

 

  1. Purchased materials on account, $392,000
  2. Incurred manufacturing wages of $400,000
  3.  Requisitioned direct materials and used direct labor in manufacturing

4.  Issued indirect materials to production, $30,000

5.Charged indirect manufacturing wages to production, $60,000

6.Depreciation of production machinery, $85,000

7. Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000

8.Allocated overheads to jobs at the predetermined rate

9.  Units completed: 551, 552 & 554

10. Sold units 551 & 554 (billed customers at a margin of 33⅓%     on sales)

  Direct Materials  Direct Labour 

Job 551

Job 552

Job 553

Job 554

$70,200

97,500

105,300 

117,000                    

 

$61,200

115,600

78,200

85,000

 

 

 

 

Required:

(a) Compute Elite’s predetermined manufacturing overhead rate for 2020.

 (b) Calculate the total manufacturing costs for each job.

(c) Using the total figures, record the above transactions in the general journal.

(d) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account, clearly showing the balance before closing the account. State the journal entries necessary to dispose of the variance. Assume that the manufacturing overhead variance is immaterial.

(e) What is the balance in the Cost of Goods Sold account after the adjustment?

 (f) Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead variance

(g) Post the appropriate entries to the Work in Process Inventory account & determine the account balance on March 31, the end of the quarter.

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