QUESTION 3 4 Ravsten Company uses a joborder costing system

QUESTION 3 & 4

Ravsten Company uses a job-order costing system. On January 1, the beginning of the current year, the company\'s inventory balances were as follows: Raw materials Work in process Finished goods $23,500 $10,360 $31,080 The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 37,500 machine-hours and incur $159,375 in manufacturing overhead cost. The following transactions were recorded for the year: a. Raw materials were purchased on account: $230,000 b, Raw materials were requisitioned for use in production: $205,000 (85% direct and 15% indirect). c. The following costs were incurred for employee services Direct labour Indirect labour Sales commissions Administrative salaries $172,000 $ 30,000 $ 40,500 $ 86,000 d. Heat, power, and water costs were incurred in the factory: $48,750 e. Prepaid insurance expired during the year: $17,500 (80% relates to factory operations, and 20% relates to selling and administrative activities) f. Advertising costs were incurred, $57,500 g. Depreciation was recorded for the year: $69,000 (75% relates to factory operations, and 25% relates to h. Manufacturing overhead cost was applied to production. The company recorded 43,000 machine-hours i. Goods that cost $525,500 to manufacture according to their job cost sheets were transferred to the j. Sales for the year totalled $770,000 and were all on account. The total cost to manufacture these goods selling and administrative activities). for the year finished goods warehouse according to their job cost sheets was $518,000 Required 1. Prepare journal entries to record the transactions given above. (Do not round intermediate calculations. If no entry is required for a transaction/event, select \"No journal entry required\" in the first account field.) View transaction list View journal entry worksheet No Transaction General Journal Debit Credit Raw materials 230,000 Microsoft Accounts payable 230,000

Solution

3a)Since actual overhead is less than applied overhead ,Therefore overhead is overapplied.

3b)Ending balance of work in process:13860

Finished goods inventory :38580

cost of goods sold :518000

Total :570440

Allocation : overapplied overhead * ending balance /Total ending balance

4)cost of goods sold = 518000-7500 = $ 510500

Gross margin = 770000-510500=259500

Net income = 259500-204750 = 54750

Account	debit	credit
Manufacturing overhead	7500
work in process [7500*13860/570440]		182
Finished goods inventory [7500*38580/570440]		507
cost of goods sold [7500*518000/570440]		6811