Unifying Concepts: Job Order Costing, Cost Flows, Journal Entries, and Predetermined Overhead Rates
Response to the following problem:
Dunn Manufacturing Company applies manufacturing overhead on the basis of direct materials costs. The estimates for 2009 were:
Direct materials costs..........................$270,000
Manufacturing overhead........................$90,000
Following are the transactions of Dunn Manufacturing Company for 2009:
a. Raw materials purchased on account, $265,000 (85% for direct use and 15% for indirect use).
b. Raw materials issued to production, 85% for direct use and 15% for indirect use, for a total of $190,000.
c. Direct labor costs, $230,000.
d. Indirect labor costs, $28,000.
e. Administrative and sales salaries, $75,000 and $40,000, respectively.
f. Utilities, $11,500; plant depreciation, $22,00 0; maintenance, $8,500. (These costs are allocated on the basis of plant floor space-administrative facilities, 1,000 square feet; manufacturing, 5,000 square feet; sales facilities, 2,000 square feet.)
g. Manufacturing equipment depreciation, $6,500.
h. Additional raw materials issued to production for direct use, $120,000.
i. Manufacturing overhead is applied.
j. Recorded factory foreman's salary, $25,000.
k. Ninety percent of existing Work-in-Process Inventory is transferred to Finished Goods Inventory. (Work-in-Process beginning inventory was $10,000.)
l. All finished goods are sold. (Assume no beginning inventory. Sales are marked up an additional 40% of cost.)
m. Over- or underapplied manufacturing overhead is closed entirely to Cost of Goods Sold
Required:
1. Prepare a journal entry for each of the transactions and show the T-accounts for Manufacturing Overhead and Work-in-Process Inventory.
2. What is the ending balance in the cost of goods sold account?
3. Interpretive Question: Comparing actual manufacturing overhead with estimates for 2009, what would you recommend that Dunn Manufacturing Company estimate for manufacturing overhead costs in 2010?