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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 ʼR’ US reported the following inventories: Materials Inventory WIP Inventory Finished Goods Inventory Bal. $208,000 Bal. $176,000 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 $400,000 (ii) Manufacturing wages incurred (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 33%% on sales $960,000

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 ʼR’ US reported the following inventories: Materials Inventory WIP Inventory Finished Goods Inventory Bal. $208,000 Bal. $176,000 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 $400,000 (ii) Manufacturing wages incurred (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 33%% on sales $960,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 the balance on the account before performing end of period closing entries. Show the journal entries necessary to dispose of the variance.
Transcribed Image Text: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 the balance 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 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. $176,000 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) (v) Assigned manufacturing wages, 85% direct labour, 15% indirect labour Depreciation expense on factory equipment used on the different jobs $95,000 (v) Other manufacturing overhead incurred $35,000 (vi) (vii) Allocated manufacturing overhead for June 20X8 Cost of jobs completed $995,000 (viii) Cost of jobs sold (on account) at a margin of 33%% on sales $960,000
Transcribed Image Text: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. $176,000 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) (v) Assigned manufacturing wages, 85% direct labour, 15% indirect labour Depreciation expense on factory equipment used on the different jobs $95,000 (v) Other manufacturing overhead incurred $35,000 (vi) (vii) Allocated manufacturing overhead for June 20X8 Cost of jobs completed $995,000 (viii) Cost of jobs sold (on account) at a margin of 33%% on sales $960,000
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