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ACCT 386 - Week 2 - Homework - Question 5

ACCT 386 - Week 2 - Homework - Question 5
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ACCT 386 - Week 2 - Homework - Question 5

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Question 5

Sovereign Millwork, Ltd., produces reproductions of antique residential moldings at a plant located in Manchester, England. Because there are hundreds of products, some of which are made only to order, the company uses a job-order costing system. On July 1, the start of the company’s fiscal year, inventory account balances were as follows:

  

 

 

  Raw materials

£

10,300 

  Work in process

£

4,800 

  Finished goods

£

8,200 


The company applies overhead cost to jobs on the basis of machine-hours. Its predetermined overhead rate for the fiscal year starting July 1 was based on a cost formula that estimated £104,000 of manufacturing overhead for an estimated activity level of 40,000 machine-hours. During the year, the following transactions were completed:

a.

Raw materials purchased on account, £165,000.

b.

Raw materials requisitioned for use in production, £142,000 (materials costing £121,000 were chargeable directly to jobs; the remaining materials were indirect).

c.

Costs for employee services were incurred as follows:

  

 

 

 Direct labor

£

98,000 

 Indirect labor

£

51,700 

 Sales commissions

£

24,000 

 Administrative salaries

£

44,000 


d.

Prepaid insurance expired during the year, £18,600 (£13,200 of this amount related to factory operations, and the remainder related to selling and administrative activities).

e.

Utility costs incurred in the factory, £13,000.

f.

Advertising costs incurred, £12,000.

g.

Depreciation recorded on equipment, £21,000. (£17,000 of this amount was on equipment used in factory operations; the remaining £4,000 was on equipment used in selling and administrative activities.)

h.

Manufacturing overhead cost was applied to jobs, £? (The company recorded 39,000 machine-hours of operating time during the year.)

i.

Goods that had cost £289,000 to manufacture according to their job cost sheets were completed.

j.

Sales (all on account) to customers during the year totaled £500,000. These goods had cost £289,000 to manufacture according to their job cost sheets.