Rockingham Manufacturing Company builds highly sophisticated engine parts for cars competing in stock racing and drag racing. The company uses a normal costing system that applies factory overhead on the basis of direct labor-hours. For the current year the company estimated that it would incur $256,000 in factory overhead costs and 16,000 direct labor-hours. The April 1 balance in inventory accounts follow: Job Y12 is the only job in process on April 1. The following transactions were recorded for the month of April:
a. Purchased materials on account, $160,000
b. Issued $180,000 of materials to production, $6,000 of which was for indirect materials. Cost of direct materials issued: c. Incurred and paid payroll cost of $40,920
Direct labor cost ($20/hour; total 1,196 hours) d. Recognize deprecation for the month: h. Applied factory overhead to production on the basis of direct labor-hours
i. Completed Job Y12 during the month and transferred it to the finished goods warehouse
j. Sold Job Z11 on account for $120,000
k. Received $50,000 of collections on account from customers during the month
Required
(1) Calculate the company's predetermined overhead rate.
(2) Prepare journal entries for the April transactions. Record job-specific items in individual Work-in-Process accounts.
(3) What was the balance of the Materials Inventory account on April 30?
(4) What was the balance of the Work-in-Process Inventory control account on April 30?
(5) What was the amount of underapplied or overapplied overhead?

Question

Rockingham Manufacturing Company builds highly sophisticated engine parts for cars competing in stock racing and drag racing. The company uses a normal costing system that applies factory overhead on the basis of direct labor-hours. For the current year the company estimated that it would incur $256,000 in factory overhead costs and 16,000 direct labor-hours. The April 1 balance in inventory accounts follow:  Job Y12 is the only job in process on April 1. The following transactions were recorded for the month of April:
a. Purchased materials on account, $160,000
b. Issued $180,000 of materials to production, $6,000 of which was for indirect materials. Cost of direct materials issued:  c. Incurred and paid payroll cost of $40,920
Direct labor cost ($20/hour; total 1,196 hours)  d. Recognize deprecation for the month:   h. Applied factory overhead to production on the basis of direct labor-hours
i. Completed Job Y12 during the month and transferred it to the finished goods warehouse
j. Sold Job Z11 on account for $120,000
k. Received $50,000 of collections on account from customers during the month
Required
(1) Calculate the company's predetermined overhead rate.
(2) Prepare journal entries for the April transactions. Record job-specific items in individual Work-in-Process accounts.
(3) What was the balance of the Materials Inventory account on April 30?
(4) What was the balance of the Work-in-Process Inventory control account on April 30?
(5) What was the amount of underapplied or overapplied overhead?

Quizplus · Accepted Answer

The Answer of Rockingham Manufacturing Company builds highly sophisticated engine parts for cars competing in stock racing and drag racing. The company uses a normal costing system that applies factory overhead on the basis of direct labor-hours. For the current year the company estimated that it would incur $256,000 in factory overhead costs and 16,000 direct labor-hours. The April 1 balance in inventory accounts follow:  Job Y12 is the only job in process on April 1. The following transactions were recorded for the month of April:
a. Purchased materials on account, $160,000
b. Issued $180,000 of materials to production, $6,000 of which was for indirect materials. Cost of direct materials issued:  c. Incurred and paid payroll cost of $40,920
Direct labor cost ($20/hour; total 1,196 hours)  d. Recognize deprecation for the month:   h. Applied factory overhead to production on the basis of direct labor-hours
i. Completed Job Y12 during the month and transferred it to the finished goods warehouse
j. Sold Job Z11 on account for $120,000
k. Received $50,000 of collections on account from customers during the month
Required
(1) Calculate the company's predetermined overhead rate.
(2) Prepare journal entries for the April transactions. Record job-specific items in individual Work-in-Process accounts.
(3) What was the balance of the Materials Inventory account on April 30?
(4) What was the balance of the Work-in-Process Inventory control account on April 30?
(5) What was the amount of underapplied or overapplied overhead?

Rockingham Manufacturing Company Builds Highly Sophisticated Engine Parts for Cars