Questions -
Q1. The following costs and inventory data were taken from the accounts of Reser Company for 2008:
Inventories: January 1 2008 December 31, 2008
Raw Materials 8,000 7,000
Work in Process 15,000 13,000
Finished goods 16,000 10,000
Costs incurred:
Raw Materials Purchased 93000
Direct labor 42,000
Factory rent 8,000
Factory utilities 7,000
Indirect materials 4,000
Indirect labor 6,000
Selling expenses 5,000
Administrative expenses 12,000
Instructions -
a. Prepare a schedule showing the amount of direct materials used in production during the year.
b. Compute the amount of manufacturing overhead incurred during the year.
c. Prepare a schedule of Cost of Goods Manufactured for Reser Company for the year ended December 31, 2008 in good form.
d. Prepare the Cost of Goods Sold section of the Income Statement for Reser Company for the year ended December 31, 2008 in good form.
Q2. Samli Company estimates that annual manufacturing overhead costs will be $600,000. Estimated annual operating activity bases are: direct labor cost $460,000, direct labor hours 40,000 and machine hours 80,000. The actual manufacturing overhead cost for the year was $602,000 and the actual direct labor cost for the year was $456,000. Actual direct labor hours totaled 40,200 and machine hours totaled 79,000. Samli applies overhead based on direct labor hours.
Instructions - Compute the predetermined overhead rate and determine the amount of manufacturing overhead applied. Determine if overhead is over- or underapplied and the amount.
Q3. The gross earnings of factory workers for Dinkel Company during the month of January are $250,000. The employer's payroll taxes for the factory payroll are $30,000. Of the total accumulated cost of factory labor, 75% is related to direct labor and 25% is attributable to indirect labor.
Instructions
(a) Prepare the entry to record the factory labor costs for the month of January.
(b) Prepare the entry to assign factory labor to production.
(c) Prepare the entry to assign manufacturing overhead to production, assuming the predetermined overhead rate is 125% of direct labor cost.
Q4. Farr Corporation had the following transactions during its first month of operations:
1. Purchased raw materials on account, $85,000.
2. Raw Materials of $30,000 were requisitioned to the factory. An analysis of the materials requisition slips indicated that $6,000 was classified as indirect materials.
3. Factory labor costs incurred were $125,000 of which $100,000 pertained to factory wages payable and $25,000 pertained to employer payroll taxes payable.
4. Time tickets indicated that $104,000 was direct labor and $21,000 was indirect labor.
5. Overhead costs incurred on account were $112,000.
6. Manufacturing overhead was applied at the rate of 150% of direct labor cost.
7. Goods costing $135,000 are still incomplete at the end of the month; the other goods were completed and transferred to finished goods.
8. Finished goods costing $100,000 to manufacture were sold on account for $130,000.
Instructions - Journalize the above transactions for Farr Corporation.