Dream Makers is a small manufacturer of gold and platinum jewelry

jagguarpaw January 18, 2017 0 Comments

Question: Dream Makers is a small manufacturer of gold and p…

Dream Makers is a small manufacturer of gold and platinum jewelry. It uses a job costing system that applies overhead on the basis of direct labor hours. Budgeted factory overhead for the year was $455,600, and management budgeted 33,500 direct labor-hours. The company had no materials, work-in-process, or finished goods inventory at the beginning of April. These transactions were recorded during April:

April insurance cost for the manufacturing property and equipment was $1,800. The premium had been paid in January.

Recorded $1,025 depreciation on an administrative asset.

Purchased 21 pounds of high-grade polishing materials at $16 per pound (indirect material).

Paid factory utility bill, $6,510 in cash.

Incurred 4,000 hours and paid payroll costs of $160,000. Of this amount, 1,000 hours and $20,000 were indirect labor costs.

Incurred and paid other factory overhead costs, $6,270.

Purchased $24,500 of materials. Direct materials included unpolished semiprecious stones and gold. Indirect materials included supplies and polishing materials.

Requisitioned $18,500 of direct materials and $1,600 of indirect materials from materials inventory.

Incurred miscellaneous selling and administrative expenses, $5,660.

Incurred $3,505 depreciation on manufacturing equipment for April.

Paid advertising expenses in cash, $2,650.

Applied factory overhead to production on the basis of direct labor hours.

Completed goods costing $64,000 manufactured during the month.

Made sales on account in April: $56,410. The cost of goods sold was $47,860.

Required

Compute the firm’s predetermined factory overhead rate for the year.

Prepare journal entries to record the April: events.

Calculate the amount of over applied or under applied overhead to be closed to the Cost of Goods Sold account on April 30.