Aubergine is a manufacturer of contemporary cases for tablets. The business uses a perpetual inventory system and has a highly labour-intensive production process, so it applies manufacturing overhead based on direct labour hours. Any overhead variance is deemed to be immaterial and therefore closed out to Cost of Goods Sold. Aubergine’s pre-determined overhead application rate for 2024 was computed from the following data: Total estimated factory overheads $4,200,000 Total estimated direct labour hours 35,000 During the first month of 2024, the business recorded the following transactions. Purchased $500,000 worth of materials on account. Separately, Aubergine paid a $3,540 bill for freight in. Incurred manufacturing wages of $1,065,000 Issued direct materials and used direct labour in manufacturing Job # Direct Materials Direct Labour Direct Labour Hours A-141 $100,000 $220,000 1,200 A-142 81,000 190,000 1,000 A-143 90,000 205,000 1,100 A-144 150,000 290,250 1,800 Issued indirect materials to production, $80,000 Charged indirect manufacturing wages to production, $159,750 vi) Depreciation expense on factory equipment used on the different jobs, $300,000 vii) Other overhead costs incurred on jobs A-141 to A-144 amounted to $112,750 viii) Applied factory overhead to the various jobs using the pre-determined factory overhead rate. ix) Finished Jobs A-141 – A-143 and transferred to the finished goods inventory account x) Shipped Job A-141 and A-142 and billed customers at a margin of 25% on cost. Required: Compute Aubergine’s predetermined manufacturing overhead rate. Calculate the total manufacturing cost 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 closing the account. Show the journal entries necessary to dispose of this variance. What is the balance in the Cost of Goods Sold account after the adjustment? Calculate the gross profit earned by Aubergine for the month.

Aubergine is a manufacturer of contemporary cases for tablets. The business uses a perpetual inventory system and has a highly labour-intensive production process, so it applies manufacturing overhead based on direct labour hours. Any overhead variance is deemed to be immaterial and therefore closed out to Cost of Goods Sold. Aubergine’s pre-determined overhead application rate for 2024 was computed from the following data: Total estimated factory overheads $4,200,000 Total estimated direct labour hours 35,000 During the first month of 2024, the business recorded the following transactions. Purchased $500,000 worth of materials on account. Separately, Aubergine paid a $3,540 bill for freight in. Incurred manufacturing wages of $1,065,000 Issued direct materials and used direct labour in manufacturing Job # Direct Materials Direct Labour Direct Labour Hours A-141 $100,000 $220,000 1,200 A-142 81,000 190,000 1,000 A-143 90,000 205,000 1,100 A-144 150,000 290,250 1,800 Issued indirect materials to production, $80,000 Charged indirect manufacturing wages to production, $159,750 vi) Depreciation expense on factory equipment used on the different jobs, $300,000 vii) Other overhead costs incurred on jobs A-141 to A-144 amounted to $112,750 viii) Applied factory overhead to the various jobs using the pre-determined factory overhead rate. ix) Finished Jobs A-141 – A-143 and transferred to the finished goods inventory account x) Shipped Job A-141 and A-142 and billed customers at a margin of 25% on cost. Required: Compute Aubergine’s predetermined manufacturing overhead rate. Calculate the total manufacturing cost 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 closing the account. Show the journal entries necessary to dispose of this variance. What is the balance in the Cost of Goods Sold account after the adjustment? Calculate the gross profit earned by Aubergine for the month.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 10E: SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that...

See similar textbooks

Related questions

Question

Aubergine is a manufacturer of contemporary cases for tablets. The business uses a perpetual inventory system and has a highly labour-intensive production process, so it applies manufacturing overhead based on direct labour hours. Any overhead variance is deemed to be immaterial and therefore closed out to Cost of Goods Sold.

Aubergine’s pre-determined overhead application rate for 2024 was computed from the following data:

Total estimated factory overheads $4,200,000

Total estimated direct labour hours 35,000

During the first month of 2024, the business recorded the following transactions.

Purchased $500,000 worth of materials on account. Separately, Aubergine paid a $3,540 bill for freight in.
Incurred manufacturing wages of $1,065,000

Issued direct materials and used direct labour in manufacturing

Job #	Direct Materials	Direct Labour	Direct Labour Hours
A-141	$100,000	$220,000	1,200
A-142	81,000	190,000	1,000
A-143	90,000	205,000	1,100
A-144	150,000	290,250	1,800

Issued indirect materials to production, $80,000
Charged indirect manufacturing wages to production, $159,750 vi) Depreciation expense on factory equipment used on the different jobs, $300,000 vii) Other overhead costs incurred on jobs A-141 to A-144 amounted to $112,750 viii) Applied factory overhead to the various jobs using the pre-determined factory overhead rate.
ix) Finished Jobs A-141 – A-143 and transferred to the finished goods inventory account x) Shipped Job A-141 and A-142 and billed customers at a margin of 25% on cost.

Required:

Compute Aubergine’s predetermined manufacturing overhead rate.
Calculate the total manufacturing cost 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 closing the account. Show the journal entries necessary to

dispose of this variance.

What is the balance in the Cost of Goods Sold account after the adjustment?
Calculate the gross profit earned by Aubergine for the month.

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here