Elite Home Decor manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labour intensive production process, so it assigns manufacturing overhead based on direct labour cost. Elite expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2020. At the end of December 2019, Elite reported work in process inventory (Job 551) of $93,000 The following events occurred during January - March 2020. Purchased materials on account, $392,000 Incurred manufacturing wages of $400,000 Requisitioned direct materials and used direct labour in manufacturing Direct Materials Direct Labour Job 551 Job 552 Job 553 Job 554 $70,200 97,500 105,300 117,000 $61,200 115,600 78,200 85,000 Issued indirect materials to production, $30,000 Charged indirect manufacturing wages to production, $60,000 Depreciation of production machinery, $85,000 Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000 viii)Allocated overheads to jobs at the predetermined rate Units completed: 551, 552 & 554 Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales) Required: What is the balance in the Cost of Goods Sold account after the adjustment? Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead variance Post the appropriate entries to Work in Process Inventory account & determine the account balance on March 31, the end of the
Elite Home Decor manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labour intensive production process, so it assigns manufacturing overhead based on direct labour cost. Elite expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2020. At the end of December 2019, Elite reported work in process inventory (Job 551) of $93,000 The following events occurred during January - March 2020. Purchased materials on account, $392,000 Incurred manufacturing wages of $400,000 Requisitioned direct materials and used direct labour in manufacturing Direct Materials Direct Labour Job 551 Job 552 Job 553 Job 554 $70,200 97,500 105,300 117,000 $61,200 115,600 78,200 85,000 Issued indirect materials to production, $30,000 Charged indirect manufacturing wages to production, $60,000 Depreciation of production machinery, $85,000 Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000 viii)Allocated overheads to jobs at the predetermined rate Units completed: 551, 552 & 554 Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales) Required: What is the balance in the Cost of Goods Sold account after the adjustment? Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead variance Post the appropriate entries to Work in Process Inventory account & determine the account balance on March 31, the end of the
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Elite Home Decor manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labour intensive production process, so it assigns manufacturing overhead based on direct labour cost. Elite expects to incur $2,205,000 of
At the end of December 2019, Elite reported work in process inventory (Job 551) of $93,000 The following events occurred during January - March 2020.
- Purchased materials on account, $392,000
- Incurred manufacturing wages of $400,000
- Requisitioned direct materials and used direct labour in manufacturing
|
|
Direct Materials |
Direct Labour |
|
Job 551 Job 552 Job 553 Job 554 |
$70,200 97,500 105,300 117,000 |
$61,200 115,600 78,200 85,000 |
- Issued indirect materials to production, $30,000
- Charged indirect manufacturing wages to production, $60,000
- Depreciation of production machinery, $85,000
- Other manufacturing overhead costs incurred on units 551 to 554 amounted to $49,000 viii)Allocated
overheads to jobs at the predetermined rate
- Units completed: 551, 552 & 554
- Sold units 551 & 554 (billed customers at a margin of 33⅓% on sales)
Required:
- What is the balance in the Cost of Goods Sold account after the adjustment?
- Compute Elite’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead variance
Post the appropriate entries to Work in Process Inventory account & determine the account balance on March 31, the end of the
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