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11 June, 00:14

Prior to the beginning of 2019, Lowe Company estimated that it would incur $176,000 of manufacturing overhead cost during 2019, using 16,000 direct labor hours to produce the desired volume of goods. On January 1, 2019, beginning balances of Materials Inventory, Work in Process Inventory, and Finished Goods Inventory were $28,000, $-0-, and $43,000, respectively. Prepare the journal entries.

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  1. 11 June, 01:05
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    raw materials 39,000 debit

    accounts payable 39,000 credit

    WIP inventory 31,000 debit

    factor overhead 11,000 debit

    raw materials 42,000 credit

    WIP materials 108,000 debit

    factory overhead 27,000 debit

    wages payable 135,000 credit

    WIP invenotry 165,000 debit

    factory overhead 165,000 credit

    factory overhead 92,000 debit

    accounts payable 92,000 credit

    factory overhead 35,000 debit

    cost of goods sold 35,000 credit

    Questions:

    a. Purchased materials on account, $39,000.

    b. Of the total dollar value of materials used, $31,000 represented direct material and $11,000 indirect material.

    c. Determined total factory labor, $135,000 (15,000 hrs. @ $9/hr.)

    d. Of the factory labor, 80% was direct and 20% indirect.

    e. Applied manufacturing overhead based on direct labor hours to work in process.

    f. Determined actual manufacturing overhead other than those items already recorded, $92,000. (Credit Accounts Payable.)

    Explanation:

    predetermined overhead rate:

    expected overhead / expeected labor hours

    176,000 / 16,000 = $11

    applied 15,000 x $11 = 165,000

    factory overhead reconciliaiton:

    92,000 + 27,000 + 11,000 = 130,000

    applied 165,000

    overapplied by 35,000
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