Option #1: Classification of Costs
Hoover, Inc., uses a job-order coding system. The companyâ€™s inventory balances on February 1, the start of its fiscal year, were as follows:
Raw Materials Inventory
Work in Process Inventory
Finished Goods Inventory
During the year, the following transactions were completed:
- Raw materials were purchased on account, $215,221.
- Raw materials were issued from the storeroom for use in production, $198,000 (70% direct and 30% indirect).
- Employee salaries and wages were accrued as follows: direct labor, $243,300; indirect labor, $98,750; and selling and administrative salaries, $72,340.
- Utility costs were incurred in the factory, $79,233.
- Advertising costs were incurred, $110,600.
- Prepaid insurance expired during the year, $35,000 (80% related to factory operations, and 20% related to selling and administrative activities).
- Depreciation was recorded, $192,100 (75% related to factory assets, and 25% related to selling and administrative assets).
- Manufacturing overhead was applied to jobs at the rate of 160% of direct labor cost.
- Goods that cost $720,200 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
- Sales for the year totaled $1,293,300 and were all on account. The total cost to manufacture these goods according to their job cost sheets was $725,825.
Submit your assignment as an Excel spreadsheet with each tab labeled by item number. Demonstrate the following:
- Prepare the journal entries to record the transactions for the year.
- Prepare the T-accounts for raw materials inventory, work in process inventory, finished goods inventory, manufacturing overhead, and cost of goods sold. Donâ€™t forget to enter the beginning balances in the inventory accounts.
- Is manufacturing overhead underapplied or overapplied for the year? Prepare a journal entry to close this balance to cost of goods sold.
Provide your answers in a clearly organized Excel spreadsheet.
Your assignment should meet the following requirements:
- 2-3 pages in length, include a title sheet
- Formatted according to CSU-Global standards
- Document your sources