Chapter 2 - T-account problem
Lau and Lau, LLC (LL, LLC) builds swimming builds custom swimming pools in Boise, Idaho. LL, LLC uses material requisition forms and direct labor time tickets to trace direct materials and direct labor costs to specific jobs. Manufacturing overhead is applied to all jobs based on a percent of direct labor costs.
At the beginning of the second month of operations, the company had the following balances:
Raw Materials $ 75,000Work in Process (WIP) $140,000Finished Goods -0-Purchased $220,000 in raw materials.Issued the following materials to production: $ 125,000 directly traceable to specific jobs.$ 30,000 that was not directly traceable to specific jobsRecorded the following labor costs (paid in cash):$ 60,000 in direct labor$ 35,000 in construction supervision$ 26,000 in administrative salariesRecorded the following actual manufacturing overhead costsConstruction insurance $ 11,500Construction equipment depreciation $ 55,000Pool permits and inspections $ 9,000Recorded the $18,000 in nonmanufacturing costs.Applied manufacturing overhead to jobs using 165% of direct labor costs. Completed 16 pools at a total cost of $352,000. One (1) of these pools costing $22,000 is still waiting for final inspection and customer approval so the sale has not been finalized.Realized sales revenue of $ 525,000 on the sale of the 15 pools that were sold. Closed the Manufacturing Overhead account balance to Cost of Goods Sold.
Required Questions:
Draw the following t-accounts and enter their beginning balances: Raw Materials, WIP, Finished Goods, MOH, COGS (if you find it helpful to draw SG&A, Sales Revenue and Cash that is okay but not required).Record the transactions listed above and calculate the ending balances for all accounts.How much is manufacturing overhead over or underapplied?Using the balances on the t-accounts, prepare the Cost of Goods Manufactured Schedule, and the company's Income Statement for the month using proper form, include the Cost of Goods Sold schedule.