Normal Costing and COGM, COGS, and Income Statement Harwood Company is a manufac
ID: 2419255 • Letter: N
Question
Normal Costing and COGM, COGS, and Income Statement Harwood Company is a manufacturer of custom-made equipment. The company uses a job-order costing system and applies manufacturing overhead cost to jobs on a basis of direct labor hours. At the beginning of 2014, the following estimates were made as a basis for computing a predetermined overhead rate for the year: manufacturing overhead cost, $360,000; and direct labor hours, 18,000.
The following transactions took place during the year (all purchases and services were acquired on account):
a. Raw materials were purchased for use in production, $200,000.
b. Raw materials were requisitioned for use in production (all direct materials), $185,000.
c. Utility bills were incurred, $70,000 (90 percent related to factory operations, and the remainder related to selling and administrative activities).
d. Salary and wage costs were incurred: Direct labor (19,500 hours) $230,000 Indirect labor 90,000 Selling and administrative salaries 110,000
e. Maintenance costs were incurred in the factory, $51,000.
f. Advertising costs were incurred, $136,000.
g. Depreciation was recorded for the year, $95,000 (80 percent related to factory equipment and the remainder related to selling and administrative equipment).
h. Rental cost incurred on buildings, $120,000 (85 percent related to factory operations and the remainder related to selling and administrative facilities).
i. Sales for the year (all on account) totaled $1,200,000. These goods cost $821,000 to manufacture (after adjusting for the applied overhead).
The balances in the inventory accounts at the beginning of the year were:
Raw materials $30,000
Work in process 21,000
Finished goods 60,000
The balances in the inventory accounts at the ending of the year were:
Raw materials ?
Work in process $35,000
Finished goods 22,000
REQUIRED:
1. Prepare a schedule of cos of goods manufactured in good form, adjusting for normal costing.
2. Prepare a cost of goods sold in good form, adjusting for normal costing.
3. Prepare an income statement for the year in good form. Ignore income taxes.
Explanation / Answer
Harwood Company Details Amt $ Estimated manufacturing overhead for the year 360,000 Direct Labor hours estimated 18,000 Predetermined Manufacturing Overhead rate per hor 20.00 Cost of Goods Manufactured Details Amt $ Raw Materials Consumed 185,000 Direct Labor cost 230,000 Manufacturing Overhead on 19500 Direct Labor hours @ 20 /DLH 390,000 Total Manufacturing cost of the year 805,000 Add : Opening balance WIP 21,000 Less : Closing balance wiP (35,000) Cost og Goods Manufactured 791,000 Cost Of Goods Sold Opening Balance Finished goods 60,000 Add : Cost of goods manufactured 791,000 Less: Closing stock Finished goods (22,000) Less : Manufacturing Overhead Overapplied (8,000) Cost Of Goods Sold 821,000 Manufacturing Overhead Over/Underapplied Actual overhead incurred Utilities 63,000 Indirect labor 90,000 Maint cost 51,000 Factory Depreciation 76,000 Rent factory 102,000 Total 382,000 Actual overhead applied 390,000 Manufacturing OH overapplied 8,000