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Sunday, 31 January 2016

Moonrise Bakery applies factory overhead based on direct labor costs. The company incurred the following costs during 2015: direct materials costs, $650,000; direct labor costs, $3,000,000; and factory overhead costs applied, $1,800,000.

Moonrise Bakery applies factory overhead based on direct labor costs. The company incurred the following costs during 2015: direct materials costs, $650,000; direct labor costs, $3,000,000; and factory overhead costs applied, $1,800,000.

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Explanation:
2.
Factory overhead ($20,000 × 40%) = $12,000

3.
We also know that the total of direct labor costs (X) and factory overhead costs (0.6X) equals $240,000.  Thus, to get the individual amounts we need to solve: [X + 0.6X = $240,000]. The solution is:

Total cost of finished goods inventory = $490,000
Less: Direct materials = 250,000
Direct labor and factory overhead costs = $240,000

Direct labor costs = $150,000
 
Factory overhead costs = $150,000 × 0.6 = $90,000

The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.

The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.


  April 30 May 31  
  Inventories          
     Raw materials $ 43,000   $ 52,000  
     Work in process   10,200     21,300  
     Finished goods   63,000     35,600  
  Activities and information for May          
     Raw materials purchases (paid with cash)       210,000  
     Factory payroll (paid with cash)       345,000  
     Factory overhead          
        Indirect materials       15,000  
        Indirect labor       80,000  
        Other overhead costs       120,000  
     Sales (received in cash)       1,400,000  
     Predetermined overhead rate based on direct labor cost       70 %


Compute the following amounts for the month of May using T-accounts.

1. Cost of direct materials used.
2. Cost of direct labor used.
3. Cost of goods manufactured.
4. Cost of goods sold.*
5. Gross profit.
6. Overapplied or underapplied overhead.

*Do not consider any underapplied or overapplied overhead.

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Explanation:

 
1. Raw materials purchases for cash.
2. Direct materials usage.
3. Indirect materials usage.
 
Prepare journal entries for the above transactions for the month of May.
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Explanation:


1. Direct labor usage.
2. Indirect labor usage.
3. Total payroll paid in cash.

Prepare journal entries for the above transactions for the month of May.
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Explanation: