Question

Prior to the beginning of 2019, Lowe Company estimated that it would incur $176,000 of manufacturing overhead cost during 2019, using 16,000 direct labor hours to produce the desired volume of goods. On January 1, 2019, beginning balances of Materials Inventory, Work in Process Inventory, and Finished Goods Inventory were $28,000, $-0-, and $43,000, respectively.Prepare the journal entries.

Answer 1

raw materials 39,000 debit

accounts payable 39,000 credit

WIP inventory 31,000 debit

factor overhead 11,000 debit

raw materials 42,000 credit

WIP materials 108,000 debit

factory overhead 27,000 debit

wages payable 135,000 credit

WIP invenotry 165,000 debit

factory overhead 165,000 credit

factory overhead 92,000 debit

accounts payable 92,000 credit

factory overhead 35,000 debit

cost of goods sold 35,000 credit

Questions:

a. Purchased materials on account, $39,000.

b. Of the total dollar value of materials used, $31,000 represented direct material and $11,000 indirect material.

c. Determined total factory labor, $135,000 (15,000 hrs. @ $9/hr.)

d. Of the factory labor, 80% was direct and 20% indirect.

e. Applied manufacturing overhead based on direct labor hours to work in process.

f. Determined actual manufacturing overhead other than those items already recorded, $92,000. (Credit Accounts Payable.)

Step-by-step explanation:

predetermined overhead rate:

expected overhead / expeected labor hours

176,000 / 16,000 = $11

applied 15,000 x $11 = 165,000

factory overhead reconciliaiton:

92,000 + 27,000 + 11,000 = 130,000

applied 165,000

overapplied by 35,000