The Boston Company began operations on December 1, 2014. The company uses normal

Question

The Boston Company began operations on December 1, 2014. The company uses normal costing techniques as part of a job-order cost system. During December, the company purchased $22,000 of direct materials. The company only worked on 1 job during December, which was Job A. Costs charged to Job A during December include $6,000 for direct materials, $7,500 for direct labor, and $8,500 for applied overhead. Job A was unfinished as of December 31. There was no underapplied or overapplied overhead for December, 2014. The company charges overhead to jobs using machine hours. For the year 2015, the accountant for the company estimates that there will be 15,000 machine hours used on jobs. The accountant also estimates that there will be $120,000 of overhead cost incurred during 2015. During 2015, the company only worked on the 3 jobs. Information for actual events that happened during 2015 are as follows: Job A Job B Job C Direct Materials Cost $11,000 $ 5,000 $14,000 Direct Labor Cost $13,000 $ 7,000 $17,000 Machine Hours 6,080 hours 1,920 hours 8,000 hours Units on the job 10 units Not applicable 20 units Boston purchased $26,000 of direct material in 2015. Only Job B was unfinished as of the end of 2015. During 2015, all 10 units on Job A were sold, and 12 units of Job C were sold. In other words, 100% of Job A was sold and 60% of Job C was sold. The total sales revenue for 2015 amounted to $260,000. Other costs incurred during 2015 were as follows: Selling Expenses $32,000 Advertising Expense $29,000 Indirect Labor $57,000 Maintenance Exp.-factory $28,000 Depreciation Exp.-FG Warehouse $17,000 Indirect Materials $19,000 Administrative Expenses $20,000 Depreciation Exp.-factory $15,000

I. Task 1 Prepare, in good form, a Schedule of Cost of Goods Manufactured for the Boston Company for 2015. Remember a proper Heading for your Schedule.

II. Task 2 Prepare, in good form, an Income Statement for 2015. For purposes of this income statement, assume that all underapplied or overapplied overhead is closed totally to Cost of Goods Sold at the end of the year. Remember a proper heading for your Statement.

Job A                    Job B                     Job C  

Direct Materials Cost        $11,000                  $ 5,000                            $14,000

Direct Labor Cost             $13,000                  $ 7,000                            $17,000

Machine Hours                 6,080 hours            1,920 hours            8,000 hours

Units on the job              10 units                 Not applicable                 20 units

Explanation / Answer

Details Amt $/Qty Estomated Machine Hrs 2015            15,000 Estimated Overhead 2015          120,000 Predetermined OH rate per Machine Hour 2015= $            8.00 Job Details   Job A Job B Job C Total Opening WIP            22,000 Direct Materials            11,000              5,000          14,000       30,000 Direct Labor cost            13,000              7,000          17,000       37,000 Machine Hrs              6,080              1,920            8,000       16,000 Predetermined Ovehead allocated@$8 per M/c Hr            48,640           15,360          64,000     128,000 Total Cost of job              94,640           27,360          95,000     195,000 Units on Job                    10 NA                  20 Status Sold WIP 8 units FG Value WIP           27,360 Value FG inventory            38,000 Actual Overhead Incurred 2015 Details Amt $ Indirect Labor            57,000 Factory Maint            28,000 Indirect Materials            19,000 Factory Depreciation            15,000 Total          119,000 Applied Overhead            128,000 Overhead overapplied              9,000        1 Boston Company   Cost Of Goods Manufactured Schedule- for the month ended Jan 31.2015 Details Amt $ Direct Materials Consumed            30,000 Direct Labor cost            37,000 Appiled Overhead          128,000 Total Cost to Manufacture          195,000 Opening inventory WIP            22,000 Less Closing Inventory WIP          (27,360) Cost Of Goods Manufactured            189,640 Boston Company          2 Income Statement for the month ended Jan 31.2015 Details Amt $ Sales Revenue          260,000 Less : Cost Of Goods Sold Cost Of Goods Manufactured          189,640 Add Opening Inventory FG                     -   Less Closing Inventory FG          (38,000) Overhead Overapplied              (9,000) Cost Of Goods Sold          142,640 Gross Profit          117,360 Less Operating Expenses Selling Expenses            32,000 Advertisement Expenses            29,000 Depreciation FG warehouse            17,000 Admin Expense            20,000 Total Operating Expense            98,000 Net Operating Income/(Loss)            19,360

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