Question & Answer: The cost accountant for Kenner Beverage Co. estimated that total factory overhead cost for the Blending Department…..

The cost accountant for Kenner Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning May 1 would be $3,000,000, and total direct labor costs would be $2,400,000. During May, the actual direct labor cost totaled $198,400, and factory overhead cost incurred totaled $253,200.

Required:

a.

What is the predetermined factory overhead rate based on direct labor cost?

b.

Journalize the entry to apply factory overhead to production for May 31. Refer to the Chart of Accounts for exact wording of account titles.

c.

What is the May 31 balance of the account Factory Overhead-Blending Department?

d.

Does the balance in part (c) represent over- or underapplied factory overhead?

CHART OF ACCOUNTS

Kenner Beverage Co.

General Ledger

ASSETS

110 Cash

121 Accounts Receivable

125 Notes Receivable

126 Interest Receivable

131 Materials

141 Work in Process-Blending Department

142 Work in Process-Filling Department

151 Factory Overhead-Blending Department

152 Factory Overhead-Filling Department

161 Finished Goods

171 Supplies

172 Prepaid Insurance

173 Prepaid Expenses

181 Land

191 Factory

192 Accumulated Depreciation-Factory

LIABILITIES

210 Accounts Payable

221 Utilities Payable

231 Notes Payable

236 Interest Payable

251 Wages Payable

EQUITY

311 Common Stock

340 Retained Earnings

351 Dividends

390 Income Summary

REVENUE

410 Sales

610 Interest Revenue

EXPENSES

510 Cost of Goods Sold

520 Wages Expense

531 Selling Expenses

532 Insurance Expense

533 Utilities Expense

534 Supplies Expense

540 Administrative Expenses

561 Depreciation Expense-Factory

590 Miscellaneous Expense

710 Interest Expense

What is the predetermined factory overhead rate based on direct labor cost?

————-%

b. Journalize the entry to apply factory overhead to production for May 31. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2

c. What is the May 31 balance of the account Factory Overhead-Blending Department?

Amount:
Debit or credit?

d. Does the balance in part (c) represent over- or underapplied factory overhead?

QUESTION:

Kellogg Company manufactures cold cereal products, such as Frosted Flakes. Assume that the inventory in process on March 1 for the Packing Department included 1,200 pounds of cereal in the packing machine hopper (enough for 800 24-oz. boxes), and 800 empty 24-oz. boxes held in the package carousel of the packing machine.

During March, 65,400 boxes of 24-oz. cereal were packaged. Conversion costs are incurred when a box is filled with cereal. On March 31, the packing machine hopper held 900 pounds of cereal, and the package carousel held 600 empty 24-oz. (1½-pound) boxes. Assume that once a box is filled with cereal, it is immediately transferred to the finished goods warehouse.

Determine the equivalent units of production for cereal, boxes, and conversion costs for March. An equivalent unit is defined as “pounds” for cereal and “24-oz. boxes” for boxes and conversion costs. If an amount is zero, enter in “0”.

Kellogg Company
Equivalent Units of Production for Cereal, Boxes, and Conversion Cost
For March
	Cereal (in pounds)	Boxes (in boxes)	Conversion Cost (in boxes)
Inventory in process, March 1
Started and completed in March
Transferred to finished goods in March
Inventory in process, March 31
Total

Costs per Equivalent Unit

Georgia Products Inc. completed and transferred 89,000 particle board units of production from the Pressing Department. There was no beginning inventory in process in the department. The ending in-process inventory was 2,400 units, which were 3⁄5 complete as to conversion cost. All materials are added at the beginning of the process. Direct materials cost incurred was $219,360, direct labor cost incurred was $28,100, and factory overhead applied was $12,598.

Determine the following for the Pressing Department. Round “cost per equivalent unit” answers to the nearest cent.

a. Total conversion cost	$
b. Conversion cost per equivalent unit	$
c. Direct materials cost per equivalent unit	$

Cost per Equivalent Unit

The following information concerns production in the Forging Department for November. All direct materials are placed into the process at the beginning of production, and conversion costs are incurred evenly throughout the process. The beginning inventory consists of $9,000 of direct materials.

ACCOUNT Work in Process—Forging Department							ACCOUNT NO.
Date		Item	Debit		Credit		Balance
							Debit		Credit
Nov.	1	Bal., 900 units, 60% completed					10,566
	30	Direct materials, 12,900 units	123,840				134,406
	30	Direct labor	21,650				156,056
	30	Factory overhead	16,870				172,926
	30	Goods transferred, ? units			?		?
	30	Bal., 1,400 units, 70% completed					?

a. Determine the number of units transferred to the next department.
units

b. Determine the costs per equivalent unit of direct materials and conversion. If required, round your answer to two decimal places.

Cost per equivalent unit of direct materials	$
Cost per equivalent unit of conversion	$

c. Determine the cost of units started and completed in November.
$

Port Ormond Carpet Company manufactures carpets. Fiber is placed in process in the Spinning Department, where it is spun into yarn. The output of the Spinning Department is transferred to the Tufting Department, where carpet backing is added at the beginning of the process and the process is completed. On January 1, Port Ormond Carpet Company had the following inventories:

Finished Goods	$62,000
Work in Process-Spinning Department	35,000
Work in Process-Tufting Department	28,500
Materials	17,000

Departmental accounts are maintained for factory overhead, and both have zero balances on January 1. Manufacturing operations for January are summarized as follows:

Jan.	1	Materials purchased on account, $500,000
	2	Materials requisitioned for use:
		Fiber-Spinning Department, $275,000
		Carpet backing-Tufting Department, $110,000
		Indirect materials-Spinning Department, $46,000
		Indirect materials-Tufting Department, $39,500
	31	Labor used:
		Direct labor-Spinning Department, $185,000
		Direct labor-Tufting Department, $98,000
		Indirect labor-Spinning Department, $18,500
		Indirect labor-Tufting Department, $9,000
	31	Depreciation charged on fixed assets:
		Spinning Department, $12,500
		Tufting Department, $8,500
	31	Expired prepaid factory insurance:
		Spinning Department, $2,000
		Tufting Department, $1,000
	31	Applied factory overhead:
		Spinning Department, $80,000
		Tufting Department, $55,000
	31	Production costs transferred from Spinning Department to Tufting Department, $547,000
	31	Production costs transferred from Tufting Department to Finished Goods, $807,200
	31	Cost of goods sold during the period, $795,200

	Required:
1.	Journalize the entries to record the operations, using the dates provided with the summary of manufacturing operations. Refer to the Chart of Accounts for exact wording of account titles.
2.	Compute the January 31 balances of the inventory accounts.*
3.	Compute the January 31 balances of the factory overhead accounts.*
*	Enter your amounts in positive value.

CHART OF ACCOUNTS

Port Ormond Carpet Company

General Ledger

ASSETS

110 Cash

121 Accounts Receivable

125 Notes Receivable

126 Interest Receivable

131 Materials

141 Work in Process-Spinning Department

142 Work in Process-Tufting Department

151 Factory Overhead-Spinning Department

152 Factory Overhead-Tufting Department

161 Finished Goods

171 Supplies

172 Prepaid Insurance

173 Prepaid Expenses

181 Land

191 Factory

192 Accumulated Depreciation-Factory

LIABILITIES

210 Accounts Payable

221 Utilities Payable

231 Notes Payable

236 Interest Payable

251 Wages Payable

EQUITY

311 Common Stock

340 Retained Earnings

351 Dividends

390 Income Summary

1. Journalize the entries to record the operations, using the dates provided with the summary of manufacturing operations. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

2. Compute the January 31 balances of the inventory accounts. Enter your amounts in positive value.

Materials
Work in Process:
• Spinning Department
• Tufting Department
Finished Goods

3. Compute the January 31 balances of the factory overhead accounts. Enter your amounts in positive value.

Factory Overhead:
• Spinning Department
• Tufting Department