166.Cisco Pool Service cleans and maintains residential pools and spas. At the beginningof the year, the company estimated that it would incur $480,000 of direct labor cost and $288,000 of manufacturing overhead. Overhead is allocated to production on the basis of direct labor cost. Actual supplies (direct materials) used during the year were $58,000, actual direct labor cost was $465,000, and actual overhead was $281,000.
a.Calculate the overhead rate for the current year.
b.Prepare the journal entry to record use of direct materials.
c.Prepare the journal entry to record direct labor.
d.Prepare the journal entry to record manufacturing overhead applied to production.
e.Prepare the journal entry to close the balance in manufacturing overhead to cost of goods sold.
CHALLENGE EXERCISES
167.Norris Decorators manufactures special order window coverings. During May, Norris’s transactions included the following:
Work in process inventory, May 1$160Sales$23,000
Factory equipment depreciation exp.2,800Selling expenses2,100
Work in process inventory, May 31240Factory supervision wages expense2,300
Raw materials purchased11,500Indirect labor cost incurred400
Raw materials inventory, May1160Factory utilities expense900
Raw materials inventory, May 31280Direct labor cost incurred5,400
Finished goods inventory, May 1700Finished goods inventory, May 31950
a. How much is the cost of direct materials issued to production during May?
b. Show the product cost amounts that would be reported on Norris’ balance sheet as of May 31, and describe the nature of each amount.
168.Howard Manufacturing applies manufacturing overhead to production at a rate of $3 per direct laborhour. The following information is provided for the month of March in 2013:
Direct materials used in production$86,000
Direct labor
Product delivery costs(shipping to customers)
Factory janitor salary57,000
13,000
31,000
Manufacturing overhead applied94,100
Direct materials purchased89,400
Indirect labor10,000
Depreciation on factory building32,000
Factory rental expense21,000
Indirect materials2,600
Sales commissions20,000
Administrative expenses54,000
a.List the account names of all period costs. How does the identification of product costs differ from period costs?
b. How much is the actual manufacturing overhead for March?
c.Why is it necessary to allocate manufacturing overhead costs to products when it is not necessary to allocate other product costs?
169.Ryder Electric applies overhead based upon machine hours. Budgeted factory overhead was $266,700 and budgeted machine hours were 19,050 for 2013. Actual machine hours totaled 18,700. The company treats under or overapplied overhead as immaterial in amount. Actual manufacturing overhead was $265,400 for the year. Before disposition of the under- or overapplied overhead, cost of goods sold was $415,000. Other account balances are:
Raw materials $40,000
Work in process 35,000
Finished goods 50,000
a. Determine the amount of any over or underapplied overhead at the end of 2013 by posting the respective amounts to the T-account in which these amounts will be accumulated. Calculate the account balance and label as over- or underapplied.
b. How much cost of goods sold will be reported on Ryder’s income statement for 2013?
c.Explain the nature of underapplied overhead and overapplied overhead as it relates to both actual and estimated overhead.
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