KRAFT ‘R’ US does customized, hand-crafted memorabilia, in which each batch of items is a job. The company has a highly labour intensive production process, so it allocates manufacturing overhead based on direct labour hours. Starz pre-determined overhead application rate for 20X8 was computed from the following data: Total estimated factory overheads $2,400,000 Total estimated direct labour hours 40,000 At the end of May 20X8, KRAFT ‘R’ US reported the following inventories: Materials Inventory WIP Inventory Finished Goods Inventory Bal. $208,000 Bal. 76,000 Bal. $95,000 During June 20X8, KRAFT ‘R’ US actually used 3,000 direct labour hours and recorded the following transactions. (i) Purchased materials on account $310,000 (ii) Manufacturing wages incurred $400,000 (iii) Materials requisitioned (includes $30,000 of indirect materials) $420,000 (iv) Assigned manufacturing wages, 85% direct labour, 15% indirect labour (v) Depreciation expense on factory equipment used on the different jobs $95,000 (v) Other manufacturing overhead incurred $35,000 (vi) Allocated manufacturing overhead for June 20X8 (vii) Cost of jobs completed $995,000 (viii) Cost of jobs sold (on account) at a margin of 33⅓% on sales $960,000 Required: (a) Compute KRAFT ‘R’ US’ predetermined manufacturing overhead rate for 20X8. (b) State the journal entries necessary to record the above transactions in the general journal. Assume that KRAFT ‘R’ US uses the perpetual inventory system. (c) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account and state theb alance on the account before performing end of period closing entries. Show the journal entries necessary to dispose of the variance.
KRAFT ‘R’ US does customized, hand-crafted memorabilia, in which each batch of items is a job. The company has a highly labour intensive production process, so it allocates manufacturing overhead based on
direct labour hours.
Starz pre-determined overhead application rate for 20X8 was computed from the following data:
Total estimated factory
Total estimated direct labour hours 40,000
At the end of May 20X8, KRAFT ‘R’ US reported the following inventories:
Materials Inventory WIP Inventory Finished Goods Inventory
Bal. $208,000 Bal. 76,000 Bal. $95,000
During June 20X8, KRAFT ‘R’ US actually used 3,000 direct labour hours and recorded the following transactions.
(i) Purchased materials on account $310,000
(ii) Manufacturing wages incurred $400,000
(iii) Materials requisitioned (includes $30,000 of indirect materials) $420,000
(iv) Assigned manufacturing wages, 85% direct labour, 15% indirect labour
(v)
(v) Other manufacturing overhead incurred $35,000
(vi) Allocated manufacturing overhead for June 20X8
(vii) Cost of jobs completed $995,000
(viii) Cost of jobs sold (on account) at a margin of 33⅓% on sales $960,000
Required:
(a) Compute KRAFT ‘R’ US’ predetermined manufacturing overhead rate for 20X8.
(b) State the
(c) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account and state theb alance on the account before performing end of period closing entries. Show the journal entries necessary to dispose of the variance.
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