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 $93,000The following events occurred during January 2019.i) Purchased materials on account, $392,000ii) Incurred manufacturing wages of $400,000iii) Requisitioned direct materials and used direct labour in manufacturing                            Direct Materials           Direct LabourJob 551                $70,200                        $61,200Job 552                $97,500                        $115,600Job 553                $105,300                      $78,200Job 554                $117,000                      $85,000iv) Issued indirect materials to production, $30,000v) Charged indirect manufacturing wages to production, $60,000vi) Other manufacturing overhead costs incurred on units 551 to 554 amounted to $134,000vii) Allocated overheads to jobs at the predetermined rateviii)Units completed: 551, 552 & 554ix) Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales)QUESTIONS(1) 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. (2) What is the balance in the Cost of Goods Sold account after the adjustment? (3)Compute G-Forcer’s gross profit earned on the jobs, after adjusting for the manufacturing overhead variance (4) Post the appropriate entries to Work in Process Inventory account & determine the account balance on January 31.

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Asked Nov 11, 2019
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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)

QUESTIONS


(1) 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. 


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


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


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

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Expert Answer

Step 1

(1)

 

The closing balance of the manufacturing overhead account is $14,000.

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T-Account for manufacturing overhead, showing the balance before closing: Manufacturing Overhead Debit ($) $30,000 Opening Balance $60,000 Credit (S) Transaction Transaction $238,000 V $134,000 $14,000 Balance $14,000 Adjustment Closing Balance OS Compute the difference in the manufacturing overhead: Amount (S) Particulars Indirect materials to production Indirect manufacturing wages Other manufacturing overhead costs Actual Manufacturing Overhead () Applied Manufacturing Overhead Over applied Manufacturing Overhead $30,000 $60,000 $134,000 $224,000 $238,000 ($14,000) Journalize the adjustment to the manufacturing overhead: Debit (S) Credit (S) Account Title Manufacturing Overhead Cost of goods sold (To record the over applied Manufacturing Overhead) $14,000 $14,000

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Step 2

(2)

 

Calculate the cost of goods sold account balance after adjustment: 

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Amount ($) Particulars Cost of goods sold before adjustme () Over applied Manufacturing Overhead Cost of goods sold after adjustment $528,740 ($14,000) $514,740

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Step 3

 (3)

 

Calculate the gross profits afte...

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Amount (S) Particulars $793,110 Sales revenue () Cost of goods sold after adjustment Gross profit earned after adjustment $514,740 $278.370

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