Froya Fabrikker AS of Bergen Norway is a small company that

Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor hours. Its predetermined overhead rate was based on a cost formula that estimated $336,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year: a. Raw materials purchased on account, $245,000. b. Raw materials used in production (all direct materials), $230,000. c. Utility bills incurred on account, $68,000 (85% related to factory operations, and the remainder related to selling and administrative activities) d. Accrued salary and wage costs Direct labor (1,125 hours) Indirect labor Selling and administrative salaries s 275,000 $ 99,000 155,000 e. Maintenance costs incurred on account in the factory, $63,000 f Advertising costs incurred on account, $145,000. g. Depreciation was recorded for the year, $81,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment) h. Rental cost incurred on account, $106,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities) Manufacturing overhead cost was applied to jobs, $ ? · j. Cost of goods manufactured for the year, $860,000. k. Sales for the year (all on account) totaled $1,650,000. These goods cost $890,000 according to their job cost sheets.

Solution

Froya Fabrikker A/S Schedule of Cost of Goods Manufactured Direct materials Raw materials inventory, beginning 39000 Purchases of raw materials 245000 Materials available for use 284000 Raw materials inventory, ending 54000 Materials used in production 230000 Direct labor 275000 Manufacturing overhead applied to work in process 336000/1050*1125 360000 Total manufacturing costs 865000 Add: Work in process, beginning. 30000 895000 Deduct: Work in process, ending (B/F) 35000 Cost of goods manufactured for the year 860000