Oberti Guitar Company makes high-quality customized guitars. Oberti uses a job order costing system. Because the guitars are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company estimated that total manufacturing overhead costs would be $300,000 and that 20,000 direct labor hours would be worked. At year-end, Anthony, the company’s founder and CEO, gives you the following information regarding Oberti’s operations. 1. The beginning balances in the inventory accounts were: Raw Materials Inventory $8,000 Work in Process Inventory $26,000 Finished Goods Inventory $32,000 2. During the year, the company purchased raw materials costing $97,000. All purchases were made on account. 3. The production department requisitioned $100,000 of raw materials for use in production. Of those, 70% were direct materials and 30% were indirect materials. 4. The company used 21,000 direct labor hours at a cost of $14 per hour during the year (credit Wages Payable). 5. The company used 6,500 indirect labor hours at a cost of $10 per hour (credit Wages Payable). 6. The company paid $178,000 for insurance, utilities, and property taxes on the factory. 7. The company recorded factory depreciation of $40,000. 8. The company applied manufacturing overhead to inventory based on the 21,000 labor hours actually worked during the year. 9. Products costing $665,000 were completed during the year and transferred to the Finished Goods Inventory. 10. During the year, the company sold products costing a total of $672,000. 11. The company closes under- and overapplied overhead to Cost of Goods Sold.

Accounting Information Systems

10th Edition

ISBN:9781337619202

Author:Hall, James A.

Publisher:Hall, James A.

Chapter2: Introduction To Transaction Processing

Section: Chapter Questions

Problem 21MCQ

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I am a littl lost with the blanks in red (attached) thank you for any help

Oberti Guitar Company makes high-quality customized guitars. Oberti uses a job order costing system. Because the guitars are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company estimated that total manufacturing overhead costs would be $300,000 and that 20,000 direct labor hours would be worked. At year-end, Anthony, the company’s founder and CEO, gives you the following information regarding Oberti’s operations.

The beginning balances in the inventory accounts were:

	Raw Materials Inventory		$8,000
	Work in Process Inventory		$26,000
	Finished Goods Inventory		$32,000

During the year, the company purchased raw materials costing $97,000. All purchases were made on account.

The production department requisitioned $100,000 of raw materials for use in production. Of those, 70% were direct materials and 30% were indirect materials.

The company used 21,000 direct labor hours at a cost of $14 per hour during the year (credit Wages Payable).

The company used 6,500 indirect labor hours at a cost of $10 per hour (credit Wages Payable).

The company paid $178,000 for insurance, utilities, and property taxes on the factory.

The company recorded factory depreciation of $40,000.

The company applied manufacturing overhead to inventory based on the 21,000 labor hours actually worked during the year.

Products costing $665,000 were completed during the year and transferred to the Finished Goods Inventory.

10.

During the year, the company sold products costing a total of $672,000.

11.

The company closes under- and overapplied overhead to Cost of Goods Sold.

Prepare journal entries for each of the transactions just listed. (Credit account titles are automatically indented when
the amount is entered. Do not indent manually. Post entries in order presented in the problem. If no entry is required,
select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
Raw Materials Inventory
8000
97000
(To record raw materials purchases)
(To record use of direct and indirect materials in production)
Work in Process Inventory
Wages Payable
(To record direct labor payroll)

Work in Process Inventory
Manufacturing Overhead
(To apply manufacturing overhead)
Finished Goods Inventory
665000
665000
(To record transfer of completed products to finished goods)

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