Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures spec
ID: 2524432 • Letter: F
Question
Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $360,000 of manufacturing overhead for an estimated allocation base of 900 direct labor-hours. The following transactions took place during the year:
Raw materials purchased on account, $200,000.
Raw materials used in production (all direct materials), $185,000.
Utility bills incurred on account, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities).
Accrued salary and wage costs:
Maintenance costs incurred on account in the factory, $54,000.
Advertising costs incurred on account, $136,000.
Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment).
Rental cost incurred on account, $120,000 (85% related to factory facilities, and the remainder related to selling and administrative facilities).
Manufacturing overhead cost was applied to jobs, $???.
Cost of goods manufactured for the year, $770,000.
Sales for the year (all on account) totaled $1,200,000. These goods cost $800,000 according to their job cost sheets.
The balances in the inventory accounts at the beginning of the year were:
Required:
1. Prepare journal entries to record the preceding transactions.
2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.
Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)
Prepare a schedule of cost of goods manufactured.
Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Journal entry worksheet
Record the entry to close any balance in the manufacturing overhead account to cost of goods sold.
Note: Enter debits before credits.
Direct labor (975 hours) $ 230,000 Indirect labor $ 90,000 Selling and administrative salaries $ 110,000Explanation / Answer
Froya Fabrikker A/S 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 = 80% x $95000 $76,000 Depreciation Expense $19,000 Accumulated Depreciation $95,000 h. Manufacturing Overhead ($120,000 x 80%) $102,000 Rent Expense $18,000 Accounts Payable $120,000 i. Work in Process $390,000 Manufacturing Overhead $390,000 Predetermined overhead rate = $360000/900 DLH $400 975 actual DLH × $400 per DLH = $390,000 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
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