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: