Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 43

Journal Entries, Schedule of Cost of Goods Manufactured

Apex Corporation manufactures eighteenth-century, classical-style furniture. It uses a job costing system that applies factory overhead on the basis of direct labor-hours. Budgeted factory overhead for the year 2010 was $1,235,475, and management budgeted 86,700 direct labor-hours. Apex had no materials, work-in-process, or finished goods inventory at the beginning of August 2010. These transactions were recorded during August:

a. Purchased 5,000 square feet of oak on account at $25 per square foot.

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b. Purchased 50 gallons of glue on account at $36 per gallon (indirect material).

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c. Requisitioned 3,500 square feet of oak and 30.5 gallons of glue for production.

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d. Incurred and paid payroll costs of $187,900. Of this amount, $46,000 were indirect labor costs; direct labor personnel earned $22 per hour on average.

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e. Paid factory utility bill, $15,230 in cash.

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f. August’s insurance cost for the manufacturing property and equipment was $3,500. The premium had been paid in March.

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g. Incurred $8,200 depreciation on manufacturing equipment for August.

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h. Recorded $2,400 depreciation on an administrative asset.

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i. Paid advertising expenses in cash, $5,500.

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j. Incurred and paid other factory overhead costs, $13,500.

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k. Incurred miscellaneous selling and administrative expenses, $13,250.

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l. Applied factory overhead to production on the basis of direct labor-hours.

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m. Completed goods costing $146,000 manufactured during the month.

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n. Sales on account in August were $132,000. The cost of goods sold was $112,000.

Required

1. Compute the firm’s predetermined factory overhead rate for the year.

2. Prepare journal entries to record the August events. Letter your entries from a to n.

3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Sold account on August 31, 2010.

4. Prepare a schedule of cost of goods manufactured and sold.

5. Prepare the income statement for August.

Step 1 of 5

1.?Predetermined Overhead Rate 

      = $1,235,475 / 86,700 = $14.25 per direct labor-hour