Question: froya fabrikker as of bergen norway is a small company...
Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $372,000 of manufacturing overhead for an estimated allocation base of 1,200 direct labor-hours. The following transactions took place during the year:
- Raw materials purchased on account, $240,000.
- Raw materials used in production (all direct materials), $225,000.
- Utility bills incurred on account, $67,000 (95% related to factory operations, and the remainder related to selling and administrative activities).
- Accrued salary and wage costs:
|Direct labor (1,275 hours)||$||270,000|
|Selling and administrative salaries||$||
- Maintenance costs incurred on account in the factory, $62,000
- Advertising costs incurred on account, $144,000.
- Depreciation was recorded for the year, $80,000 (85% related to factory equipment, and the remainder related to selling and administrative equipment).
- Rental cost incurred on account, $105,000 (90% related to factory facilities, and the remainder related to selling and administrative facilities).
- Manufacturing overhead cost was applied to jobs, $ ? .
- Cost of goods manufactured for the year, $850,000.
- Sales for the year (all on account) totaled $1,600,000. These goods cost $880,000 according to their job cost sheets.
The balances in the inventory accounts at the beginning of the year were:
|Work in Process||$||29,000|
1. Prepare journal entries to record the preceding transactions.
2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.