2. Our company is closed for of our warehouse stock.

11 answers
Question:

2. Our company is closed for
of our warehouse stock.

Answers

1)253,000

2) Journal entry

Dr Cost of goods sold253,000

Cr Manufacturing overhead 253,000

3) Journal entry

Dr Work in process 15,180

Dr Finished goods 35,250

Dr Cost of goods sold202,570

Cr Manufacturing overhead 253,000

Explanation:

Luzadis Company

1) Overhead rate will be:

$1,068,000 total manufacturing overhead ÷Estimated activity level 89,000

=12 per machine-hours.

Applied overhead

= 12*67,000

= 804,000

Actual overhead = 551,000

Under applied overhead.

= 804,000-551,000

= 253,000

2) Journal entry

Dr Cost of goods sold253,000

Cr Manufacturing overhead 253,000

3) Journal entry

Dr Work in process (253,000*6%)15,180

Dr Finished goods (253,000*15%)35,250

Dr Cost of goods sold202,570

Cr Manufacturing overhead 253,000

a. Journal entries

Dec. 2

Raw Materials $400,000 (debit)

Accounts Payable $400,000 (credit)

Dec. 3

Work In Process : job no. 100 $100,000 (debit)

Raw Materials $100,000 (credit)

Dec. 9

Work In Process : job no. 101 $150,000 (debit)

Raw Materials $150,000 (credit)

Dec. 15

Work In Process : job no. 102 $30,000 (debit)

Raw Materials $30,000 (credit)

Dec. 28

Work In Process : job no. 100 $9,000 (debit)

Work In Process : job no. 101 $11,000 (debit)

Work In Process : job no. 102 $5,000 (debit)

Salaries Payable $100,000 (credit)

Dec. 28

Work In Process : job no. 100 $27,000 (debit)

Work In Process : job no. 101 $33,000 (debit)

Work In Process : job no. 102 $15,000 (debit)

Overheads $75,000 (credit)

Dec. 29

Finished Goods : job no. 100 $136,000 (debit)

Finished Goods : job no. 101 $194,000 (debit)

Work In Process : job no. 100 $136,000 (credit)

Work In Process : job no. 101 $194,000 (credit)

Dec. 30

Accounts Receivable $200,000 (debit)

Cost of Sales :  job no. 100 $136,000 (debit)

Sales Revenue $200,000 (credit)

Finished Goods : job no. 100 $136,000 (credit)

Dec. 31

Overheads $78,000 (debit)

Cash $78,000 (credit)

Dec. 31

Cost of Sales $3,000 (debit)

Overheads $3,000 (credit)

b. Cost of Goods Sold

Cost of Sales :  job no. 100              $136,000

Add Under - Applied Overheads        $3,000

Cost of Goods Sold                          $139,000

c. inventory balances

Work In Process Balance                 $50,000

Finished Goods Balance                 $194,000

Raw Materials Balance                    $120,000

d. Manufacturing Overheads Application

Manufacturing Overheads were under-applied by $3,000

Explanation:

Raw Materials Balance :

Raw Materials Purchase                $400,000

Less Materials Used

job no. 100                                     ($100,000)

job no. 101                                      ($150,000)

job no. 102                                      ($30,000)

Raw Materials Balance                 $120,000

Work In Process Balance :

Only job no. 102 was yet to be completed

Costs of this job is as follows :

Raw Materials                                   $30,000

Direct Labor                                        $5,000

Overheads                                         $15,000

Work In Process Balance                 $50,000

Finished Goods Balances :

Only Job 101 was completed and yet to be sold

Raw Materials                                   $150,000

Direct Labor                                        $11,000

Overheads                                         $33,000

Finished Goods Balance                 $194,000

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Part (1) Calculate the under applied or over applied overhead.

Manufacturing overhead incurred is $1,029,000. Applied overhead is $884,000.

Under applied overhead = Manufacturing overhead incurred — Applied overhead

Under applied overhead = $1,029,000 - $884,000

Under applied overhead = $145,000

Note:

Applied overhead= (Applied overhead in WIP) + (Applied overhead in Finished goods) + (Applied overhead in cost good sold)  

Applied overhead = $88,400 + 0132,600 + 6663,000

Applied overhead = $884,000

Part (2) Record the journal entry for under or over applied overhead to cost of goods sold.

(To record the under applied overhead transferred to cost of goods sold)

Debit: Cost of goods sold =  $145,000  

Credit: Manufacturing overhead = $145,000

Part (3) Record the journal entry for proportional allocation of under or over applied overhead to WIP, finished goods and cost of goods sold.

Debit: Work-in-process ($145000 × $88400 ÷ $884,000) = $14500  

Debit: Finished goods ($145000 × $132600 ÷ $884000) = $21750  

Debit: Cost of goods sold ($145000 × $663,000 ÷ $884,000) = $108750  

Credit: Manufacturing overhead = $145000

(To record under or over applied overhead transferred to WIP. finished goods and cost of goods sold)    

Part (4)

The net operating profit will be increased to the extent of $36250 (14500 + 21750) if the under applied overhead is allocated to work-in-process, finished goods and cost of goods sold rather than being closed to cost of goods sold.

Part 1.  Compute the company%u2019s predetermined overhead rate for the year

Predetermined overhead rate  = $15 / Computer Hour

Part 2. Compute the underapplied or overapplied overhead for the year.

Underapplied Overheads are: $1,350,000 -  $900,000 = $450,000

Part 3.  Assume the company closes any underapplied or overapplied overhead directly to cost of goods sold. Prepare the appropriate journal entry.

Cost of goods sold $450,000 (debit)

Overhead Account $450,000 (credit)

Part 4. Company allocates any underapplied or overapplied overhead to work in process, finished goods, and cost of goods sold on the basis of the amount of overhead applied during the year that remains in each account at the end of the year:

Work In Process $18,000 (debit)

Finished Goods $73,008 (debit)

Cost of Goods Sold $315,000 (debit)

Overhead Account $450,000(credit)

Explanation:

Part 1.  Compute the company%u2019s predetermined overhead rate for the year

Predetermined overhead rate = Budgeted Overheads / Budgeted Activity

                                                    = $1,275,000/ 85,000

                                                    = $15 / Computer Hour

Part 2. Compute the underapplied or overapplied overhead for the year.

Applied Overheads = Actual hours × Predetermined overhead rate

                                 = 60,000 × $15

                                 =  $900,000

Actual Overheads = given = $1,350,000

Applied Overheads $900,000 < Actual Overheads $1,350,000, thus we have an underapplied situation

Therefore Underapplied Overheads are: $1,350,000 -  $900,000 = $450,000

Part 3.  Assume the company closes any underapplied or overapplied overhead directly to cost of goods sold. Prepare the appropriate journal entry.

Cost of goods sold $450,000 (debit)

Overhead Account $450,000 (credit)

Part 4. Company allocates any underapplied or overapplied overhead to work in process, finished goods, and cost of goods sold on the basis of the amount of overhead applied during the year that remains in each account at the end of the year:

Allocations:

                                         Totals          Weighted Average%       Allocation

Work In Process              $43,200                   4%                           $18,000

Finished Goods              $280,800               26%                           $73,008

Cost of Goods Sold        $756,000               70%                          $315,000

Total                                $1,080,000            100%                         $450,000

Journals:

Work In Process $18,000 (debit)

Finished Goods $73,008 (debit)

Cost of Goods Sold $315,000 (debit)

Overhead Account $450,000(credit)

rate: 18.99

underapplied for 68,600

cost of goods sold        68,600 debit

        factory overhead                        68,600 credit

This decrease the net operating income as we have more cost.

Explanation:

[tex]\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate[/tex]

the predetermined overhead rate will be calcualte by dividing the expected cost over the cost driver. In this case, computer-hours

1,278,000 / 82,000 = 15.585 fixed

we will add the variable overhead of 3.4 for a total of: 18,985 = 18.99

actual overhead: 1,208,000

applied ovehread 60,000 x 18.99 = 1.139.400‬

as the appleid is lower than actual,  the overehad was underapplied we need to recognize more cost of goods sold.

underapplied for: 1,208,000 - 1,139,400 = 68,600

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Explanation:

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