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 cost. 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. i) Purchased materials on account, $392,000 ii) Incurred manufacturing wages of $400,000 iii) Requisitioned direct materials and used direct labor in manufacturing Direct Materials Direct Labor Job 551 $70,200 $61,200 Job 552 97,500 115,600 Job 553 105,300 78,200 Job 554 117,000 85,000 v) Issued indirect materials to production, $30,000 v) Charged indirect manufacturing wages to production, $60,000 vi) Depreciation of production machinery, $85,000 vii) Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000 viii)Allocated overheads to jobs at the predetermined rate ix) Units completed: 551, 552 & 554 x) Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales) Required: (a) 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. (b) What is the balance in the Cost of Goods Sold account after the adjustment? (c) Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead Variance
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 cost. Elite expects to incur $2,205,000 of
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.
i) Purchased materials on account, $392,000
ii) Incurred manufacturing wages of $400,000
iii) Requisitioned direct materials and used direct labor in manufacturing
|
|
Direct Materials |
Direct Labor |
|
Job 551 |
$70,200 |
$61,200 |
|
Job 552 |
97,500 |
115,600 |
|
Job 553 |
105,300 |
78,200 |
|
Job 554 |
117,000 |
85,000 |
v) Issued indirect materials to production, $30,000
v) Charged indirect manufacturing wages to production, $60,000
vi)
vii) Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000
viii)Allocated
ix) Units completed: 551, 552 & 554
x) Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales)
Required:
(a) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account, clearly showing the balance before closing the account. State the
(b) What is the balance in the Cost of Goods Sold account after the adjustment?
(c) Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead Variance.
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