Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. (The Norwegian currency is the krone, which is denoted by Nkr. ) The company uses a sob-order costing system arid applies manufacturing overhead cost to jobs on the basis of direct labor-hours. At the beginning of the year, the following estimates were made for the purpose of computing the predetermined overhead rate: manufacturing overhead cost, Nkr360,000; and direct labor-hours, 900.
The following transactions took place during the year (all purchases and services were acquired on account):
a. Raw materials were purchased for use in production, Nkr200,000.
b. Raw materials were requisitioned for use in production (all direct materials), Nkr185,000.
c. Utility bills were incurred, Nkr70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
d. Salary and wage costs were incurred: [pic] e. Maintenance costs were incurred in the factory, Nkr54,000.
f. Advertising costs were incurred, Nkrl36,000.
g. Depreciation was recorded for the year, Nkr95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
h. Rental cost incurred on buildings, Nkrl20,000 (85% related to factory operations, and the remainder related to selling and administrative facilities).
i. Manufacturing overhead cost was applied to jobs, Nkr
j. Cost of goods manufactured for the year, Nkr770,000.
k. Sales for the year (all on account) totaled Nkrl,200,000. These goods cost Nkr800,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: [pic]
- Prepare journal entries to record the preceding data.
- Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above. ) Determine the ending balances in the inventory accounts and in the Manufacturing Overhead account.
- Prepare a schedule of cost of goods manufactured.
- Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost Goods Sold. Prepare a schedule of cost of goods sold.
- Prepare an income statement for the year.
- Job 412 was one of the many jobs started and completed during the year.
The job required Nkr8,000 in direct materials and 39 hours of direct labor time at a total direct labor cost of Nkr9,200. The job contained only four units. If the company bills at a price 60% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer?
1. a. Raw Materials 200,000 Accounts Payable 200,000 b. Work in Process 185,000 Raw Materials 185,000 c. Manufacturing Overhead 63,000 Utilities Expense 7,000 Accounts Payable 70,000 d. Work in Process 230,000 Manufacturing Overhead 90,000 Salaries Expense 110,000 Salaries and Wages Payable 430,000 e. Manufacturing Overhead 54,000 Accounts Payable 54,000 f. Advertising Expense 136,000 Accounts Payable 136,000 g. Manufacturing Overhead 76,000 Depreciation Expense 19,000 Accumulated Depreciation 95,000 h.Manufacturing Overhead 102,000 Rent Expense 18,000 Accounts Payable 120,000 i. Work in Process 390,000 Manufacturing Overhead 390,000 [pic] 975 actual DLH ? Nkr400 per DLH = Nkr390,000 j. Finished Goods 770,000 Work in Process 770,000 k. Accounts Receivable 1,200,000 Sales 1,200,000 Cost of Goods Sold 800,000 Finished Goods 800,000
2. Accounts Receivable Sales (k) 1,200,000 Bal. 30,000 Bal. 21,000 Bal. 60,000 (a) 200,000 (d) Direct materials: Raw materials inventory, beginning Nkr 30,000 Purchases of raw materials 200,000 Materials available for use 230,000 Raw materials inventory, ending 45,000 Materials used in production Nkr185,000 Direct labor 230,000 Manufacturing overhead applied to work in process 390,000 Total manufacturing costs 805,000 Add: Work in process, beginning 21,000 826,000 Deduct: Work in process, ending 56,000 Cost of goods manufactured Nkr770,000
4. Manufacturing Overhead 5,000 Cost of Goods Sold 5,000 Schedule of cost of goods sold: Finished goods inventory, beginning Nkr 60,000 Add: Cost of goods manufactured 770,000 Goods available for sale 830,000 Deduct finished goods inventory, ending 30,000 Unadjusted cost of goods sold 800,000 Deduct: Overapplied overhead 5,000 Adjusted cost of goods sold Nkr795,000
5. Froya Fabrikker A/S Income Statement Sales Nkr1,200,000 Cost of goods sold 795,000 Gross margin 405,000 Selling and administrative expenses: Advertising expense Nkr136,000 Utilities expense 7,000 Salaries expense 110,000 Depreciation expense 19,000 Rent expense 18,000 290,000 Net operating income Nkr 115,000
6. Direct materials Nkr 8,000 Direct labor 9,200 Manufacturing overhead applied 15,600 (39 hours ? Nkr400 per hour) Total manufacturing cost 32,800 Add markup (60% ? Nkr32,800) 19,680 Total billed price of Job 412 Nkr52,480 Nkr52,480 ? 4 units = Nkr13,120 per unit