Exquisite Furnishings manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labour intensive production process, so it assigns manufacturing overhead based on direct labour cost. The company expects to incur $2,205,000 0f manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2017.
At the end of December 2016, Exquisite reported work in process inventory (Job 501) of $93,000 The following events occurred during January 2017.
Purchased materials on account, $392,000
Incurred manufacturing wages of $400,000
Requisitioned direct materials and used direct labour in manufacturing
Issued indirect materials to production, $30,000
Charged indirect manufacturing wages to production, $60,000
Other manufacturing overhead costs incurred on units 501 to 504 amounted to $134,000
Allocated overheads to jobs at the predetermined rate
Units completed: 501, 502 & 504
Shipped/sold units 501 & 504 (billed customers at a mark-up of 50% on cost)
Compute Exquisite’s predetermined manufacturing overhead rate for 2017.
Calculate the total manufacturing costs for each job.
Using the total figures, record the above transactions in the general journal.
Post the manufacturing overhead transactions to the Manufacturing Overhead T-account, and state the balance on the account before performing end of period closing entries. State the journal entries necessary to dispose of the variance. Assume that the manufacturing overhead
variance is immaterial. (3 marks)
(e) What is the balance in the Cost of Goods Sold account after the adjustment? (2 marks)
Compute Exquisite’s gross profit earned on the jobs, after adjusting for the manufacturing
(g) Determine the balance in Work in Process Inventory on January 31.