Question

PART 1
G-Force Woodcraft manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labour intensive production process, so it assigns manufacturing overhead based on direct labour cost. G-Force expects to incur \$2,205,000 of manufacturing overhead costs and estimated direct labour costs of \$3,150,000 during 2016. At the end of December 2018, G-Force reported work in process inventory (Job 551) of \$93,000

The following events occurred during January 2019.
i) Purchased materials on account, \$392,000
ii) Incurred manufacturing wages of \$400,000
iii) Requisitioned direct materials and used direct labour in manufacturing
Direct Materials           Direct Labour
Job 551                \$70,200                        \$61,200
Job 552                \$97,500                        \$115,600
Job 553                \$105,300                      \$78,200
Job 554                \$117,000                      \$85,000

iv) Issued indirect materials to production, \$30,000

v) Charged indirect manufacturing wages to production, \$60,000

vi) Other manufacturing overhead costs incurred on units 551 to 554 amounted to \$134,000

vii) Allocated overheads to jobs at the predetermined rate

viii)Units completed: 551, 552 & 554

ix) Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales)

Required:
(a) Compute G-Force’s predetermined manufacturing overhead rate for 2019.

(b) Calculate the total manufacturing costs for each job.

(c) Using the total figures, record the above transactions in the general journal.

(d) 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.

(e) What is the balance in the Cost of Goods Sold account after the adjustment?

(f) Compute G-Forcer’s gross profit earned on the jobs, after adjusting for the manufacturing overhead variance

(g) Post the appropriate entries to Work in Process Inventory account & determine the account balance on January 31.

PART 2
Wilkin Products Ltd. makes a single product using two processes. Quality control check takes place during the process, at which point, rejected units are separated from good units.

The following details relate to production for the month of April 20X7, for Process 2.

(i) Work-in-process, beginning inventory: -0-

(ii) Transfer from Process 1: 15,000 units valued at \$51.40 each

(iii) Other manufacturing costs incurred during April:

Direct labour                                    \$365,000

(iv) Normal losses were estimated to be 5% of input during the period. The scrap value of any loss is \$40 per unit.

(v) At inspection 1,750 units were rejected as scrap. These units had reached the following degree of completion:
Input material                          100%
Conversion costs                      30%

(vi) 12,000 units were completed and transferred to Finished Goods Inventory.

(vii) Work-in-process at the end of April had reached the following degree of completion:
Input material                          100%
Conversion costs                      40%

Required:
(a) Prepare a statement of equivalent production to determine the equivalent units for direct materials (From Process 1 & Direct Material Added), and conversion costs and the cost per equivalent unit for
direct materials and conversion costs.

(b) Calculate the:
- Total cost of units completed and transferred to Finished Goods inventory
- Cost of abnormal losses
- Cost of ending work-in-process inventory in Process 2

(c) Prepare Wilkin’s Work-In-Process Inventory - Process 2 T-account, clearly showing the ending balance.

(d) State the journal entries necessary to record the assignment of direct materials, direct manufacturing wages and manufacturing overhead applied to Process 2. Also give the journal entries to record the cost of goods completed and transferred to finished goods.

(e) Given that 20% of the unexpected losses were as a result of pilferage, prepare the abnormal spoilage statement, clearly showing Wilkin Product’s true loss.