Sovereign Millwork, Ltd., produces reproductions of antique residential moldings at a plant located in

Problem 3-27 Comprehensive Problem [LO1, LO2, LO4, LO5, LO6, LO7]

Sovereign Millwork, Ltd., produces reproductions of antique residential moldings at a plant located in Manchester, England. Because there are hundreds of products, some of which are made only to order, the company uses a job-order costing system. On July 1, the start of the company’s fiscal year, inventory account balances were as follows:

 

Raw materials	£	10,000
Work in process	£	4,000
Finished goods	£	8,000

 

The company applies overhead cost to jobs on the basis of machine-hours. Its predetermined overhead rate for the fiscal year starting July 1 was based on a cost formula that estimated £99,000 of manufacturing overhead for an estimated activity level of 45,000 machine-hours. During the year, the following transactions were completed:

 

a.	Raw materials purchased on account, £160,000.
b.	Raw materials requisitioned for use in production, £140,000 (materials costing £120,000 were chargeable directly to jobs; the remaining materials were indirect).
c.	Costs for employee services were incurred as follows:

 

Direct labor	£	90,000
Indirect labor	£	60,000
Sales commissions	£	20,000
Administrative salaries	£	50,000

 

d.	Prepaid insurance expired during the year, £18,000 (£13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities).
e.	Utility costs incurred in the factory, £10,000.
f.	Advertising costs incurred, £15,000.
g.	Depreciation recorded on equipment, £25,000. (£20,000 of this amount was on equipment used in factory operations; the remaining £5,000 was on equipment used in selling and administrative activities.)
h.	Manufacturing overhead cost was applied to jobs, £?. (The company recorded 50,000 machine-hours of operating time during the year.)
i.	Goods that had cost £310,000 to manufacture according to their job cost sheets were completed.
j.	Sales (all on account) to customers during the year totaled £498,000. These goods had cost £308,000 to manufacture according to their job cost sheets.

 

1.	Prepare journal entries to record the transactions for the year. (Round your intermediate calculations to 2 decimal places. Omit the "£" sign in your response.)
2.	Prepare t-accounts for inventories, manufacturing overhead, and cost of goods sold. Post relevant data from your journal entries to these t-accounts (don’t forget to enter the opening balances in your inventory accounts). Compute an ending balance in each account. (Record the transactions in the given order. Round your intermediate calculations to 2 decimal places. Omit the "£" sign in your response.)
3-a.	Is manufacturing overhead underapplied or overapplied for the year?
3-b.	Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. (Round your intermediate calculations to 2 decimal places. Omit the "£" sign in your response.)
4.	Prepare an income statement for the year. (Input all amounts as positive values. Round your intermediate calculations to 2 decimal places. Omit the "£" sign in your response.)

 

CLICK HERE TO GET THE ANSWER !!!!