Name:
Chapter 6 & 7 Assignment – Fall 2016
Due Date: 9/29/2016 (13 points)
Answers (also turn in your journal entries/work):
1.
Predetermined OH rate: _______________________
2.
Summarize (fill in) the following accounts:
WIP
OH
3.
Overhead is (circle one) over- / under- applied by $ _______________________
4.
The journal entry to close overhead is:
5.
COGM is:
$ _____________________________________________
6.
Net Income is:
(after taxes!)
$ _____________________________________________
Strings Galore, LLC
Strings Galore, LLC manufacture instruments for use by large and small bands. The company
uses a normal costing system, in which manufacturing overhead is applied on the basis of
direct labor hours. The company’s budget for the current year includes the following predictions:
Budgeted total manufacturing overhead
Budgeted total direct-labor hours
$5,000,000
400,000
During November, the company worked to complete the following two orders (production jobs):
Job No. 334: consisting of 76 mandolins
Job No. 232: consisting of 110 guitars
The events of November are described as follows:
a. One thousand square feet of Maplewood was purchased on account for $6,600.
b. Four hundred pounds of wire (used to manufacture strings) was purchased on account for $6,800.
c. The following requisitions were submitted to the inventory warehouse on November 6th:
i. Requisition 808: 480 square feet of Maplewood at $7 per square foot to be used
for mandolins.
ii. Requisition 12: 1,500 pounds of wire at $6 per pound to be used for guitars.
iii. Requisition 324: 25 gallons of clear coat instrument wax at $10 per gallon.
d. An analysis of labor time cards revealed the following labor usage for November:
i. Direct labor: Mandolins, 1,700 hours at $60 per hour
ii. Direct labor: Guitars, 1,750 hours at $40 per hour
iii. General factory cleanup totaling $4,900
iv. Factory supervisory salaries totaling $14,000
e. Depreciation of the factory building and equipment during November amounted to $11,500
f. Rent paid in cash for factory equipment used during November was $1,600
g. Heat and light costs on the factory incurred during November amounted to $2,800. The
invoices for these costs were received, but the bills were not paid in November.
h. November property taxes on the factory were paid in cash, totaling $1,900.
i. The insurance cost covering factory operations for the month of November was $3,800.
The insurance policy had been prepaid.
j. The cost of salaries and fringe benefits for sales and administrative personnel paid in cash
during November amounted to $9,000.
k. Depreciation on sales office equipment and space amounted to $5,900.
Strings Galore LLC – Continued
l. Other selling and administrative expenses paid in cash during November amounted to
$1,300.
m. The order of mandolins was completed on November 20.
n. Seventy-five percent of the 76 mandolins in job 334 were sold on account during
November for $3,000 each.
o. Double check that all overhead has been applied for the period
p. Close the overhead account at the end of the period.
q. Strings Galore is carrying forward a loss from prior years and therefore has an effective
tax rate of 10%
The November 1 balances in selected accounts are as follows:
Cash ……………………………….. $35,000
AR: Accounts Receivable….. ……… $32,000
Prepaid Insurance…………………..
$6,000
Raw-Material Inventory…………… $120,000
Manufacturing Supplies Inventory…
$600
WIP: Work-in-Process Inventory…. $56,000
FG: Finished Goods Inventory …… $180,000
Accumulated Depreciation on PPE … $80,000
AP: Accounts Payable …………….. $16,500
Wages Payable ……………………. $98,500
Required:
1. Prepare journal entries to record the events of November.
2. Set up T-accounts, and post the journal entries from (1) in the t-accounts.
Note: in the process of (1) and (2) you will need to calculate the predetermined OH rate.
3. Calculate the over-applied or under-applied overhead for November.
4. Record the journal entry to close the overhead account for November.
