Because each display unit is a unique design and may require anything from a few hours to a month or more to complete Brinkerhoff Inc. uses a job-order costing system. Overhead in the fabrication shop is charged to display units on the basis of direct labor cost. The company?s predetermined overhead rate for the year is based on a cost formula that estimated $99000 in manufacturing overhead for an estimated allocation base of $110000 direct labor dollars. The following transactions were recorded during the year: a.Raw materials such as wood paints and metal sheeting were purchased onManagerial Accounting account82000. b.Raw materials were issued to production93000; $5600 of this amount was for indirect materials. c.Payroll costs incurred and paid: direct labor125000; indirect labor49500; and selling and administrative salaries71000. d.Fabrication shop utilities costs incurred14000. e.Depreciation recorded for the year23000 ($4200 on selling and administrative assets; $18800 on fabrication shop assets). f.Prepaid insurance expired4600 ($3400 related to fabrication shop operations and $1200 related to selling and administrative activities). g.Shipping expenses incurred41000. h.Other manufacturing overhead costs incurred17800 (credit Accounts Payable). i.Manufacturing overhead was applied to production. Overhead is applied on the basis of direct labor cost. j.Display units that cost $281000 to produce according to their job cost sheets were completed. k.Sales for the year totaled $530000 and were all on account. The total cost to produce these display units was $250000 according to their job cost sheets. l.Collections on account from customers415000. m.Payments on account to suppliers141000. Required: 1.Prepare a T-account for each account on the company?s balance sheet and enter the beginning balances. 2.Make entries directly into the T-accounts for transactions (a) through (m). Create new T-accounts as needed. Determine an ending balance for each T-account. 3.Was manufacturing overhead underapplied or overapplied for the year? Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 4.Prepare an income statement for the year. (Do not prepare a schedule of cost of goods manufactured; all of the information needed for the income statement is available in the T-accounts.)”
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