Forest Components makes aircraft parts. The following transactions occurred in J
ID: 2341503 • Letter: F
Question
Forest Components makes aircraft parts. The following transactions occurred in July: 1. Purchased $16,800 of materials on account. 2. Issued $16,830 in direct materials to the production department. 3. Issued $1,280 of supplies from the materials inventory 4. Paid for the materials purchased in transaction (1) using cash 5. Returned $2,080 of the materials issued to production in (2) to the materials inventory. 6. Direct labor employees earned $32,200, which was paid in cash. 7. Paid $17,310 for miscellaneous items for the manufacturing plant. Accounts Payable was credited. 8. Recognized depreciation on manufacturing plant of $37,000. 9. Applied manufacturing overhead for the month. Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $435,200. Estimated overhead for the year was $396,032. The following balances appeared in the inventory accounts of Forest Components for July: BeginningEnding ? Materials Inventory Work-in-Process Inventory Finished Goods Inventory Cost of Goods Sold S 12,460 10,560 6,980 75,000 $2,740Explanation / Answer
a.
Predetermined overhead rate = Estimated overhead/Estimated direct labor costs = $396032/$435200 = 91% of direct labor cost
Applied manufacturing overhead = 91% x $32200 = $29302
b.
No Transactions General Journal Debit Credit 6 6 Work-in-process - direct labor 32200 Cash 32200 9 9 Work-in-process-overhead 29302 Applied manufacturing overhead 29302