30 Jan Problem 4-30Maverick Wings, Inc. manufactures airp
Problem 4-30Maverick Wings, Inc. manufactures airplanes for use in stunt shows. Maverick’s factory is highly automated, using the latest in robotic technology. To keep costs low, the company employs as few factory workers as possible. Since each plane has different features (such as its shape, weight, and color), Maverick uses a job order costing system to accumulate product costs.At the end of 2013, Maverick’s accountants developed the following expectations for 2014 based on the marketing department’s sales forecast:Budgeted overhead cost$1,079,000Estimated machine hours44,000Estimated direct labor hours9,000Estimated direct materials cost$1,520,000Maverick’s inventory count, completed on December 31, 2013, revealed the following ending inventory balances:Raw Materials Inventory$250,000Work in Process Inventory$625,000Finished Goods Inventory$1,240,000The company’s 2014 payroll data revealed the following actual payroll costs for the year:Job TitleNumberEmployedWage Rateper HourAnnualSalary perEmployeeTotal HoursWorked perEmployeePresident and CEO1$228,000Vice president and CFO1$178,000Factory manager1$40,500Assistant factory manager1$30,600Machine operator5$14.502,250Security guard, factory2$20,600Materials handler2$7.502,000Corporate secretary1$35,800Janitor, factory2$62,150The following information was taken from Maverick’s Schedule of Plant Assets. All assets are depreciated using the straight-line method.Plant AssetPurchase PriceSalvage ValueUseful LifeFactory building$4,000,000$150,00020 YearsAdministrative office$650,000$125,00030 YearsFactory equipment$2,000,000$20,00012 YearsOther miscellaneous costs for 2014 all paid in cash included:CostAmountFactory insurance$12,200Administrative office utilities$5,800Factory utilities$33,100Office supplies$4,500Additional information about Maverick’s operations in 2014 includes the following:Raw materials purchases for the year amounted to $1,947,000. All purchases were on account.The company used $1,860,000 in raw materials during the year. Of that amount, 85% was direct materials and 15% was indirect materials.Maverick applied overhead to Work in Process Inventory based on direct materials cost.Airplanes costing $3,450,000 to manufacture were completed and transferred out of Work in Process Inventory.Maverick uses a markup of 80% to price its airplanes. Sales for the year were $6,570,000.(Note: This transaction requires two journal entries.)All sales were on account.What was Maverick’s predetermined overhead rate in 2014? (Round answer to 2 decimal places, e.g. 2.45%.)Predetermined overhead rate% of direct materials costSHOW LIST OF ACCOUNTSLINK TO TEXTPrepare the journal entries to record Maverick’s costs for 2014. (Use Salaries Payable and Wages Payable accounts for payroll costs.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Post entries in order presented in the problem. Round answers to 0 decimal places, e.g. 345,000.)No.Account Titles and ExplanationDebitCredit1.(To record salaries for president, vice president, and corpoarte secretary)2.(To record labor costs for factory manager, assistant factory manager, and two security gaurds)3.(To record direct labor)4.(To record depreciation on administrative office equipment)5.(To record depreciation on factory building and equipment)6.(To record administrative office utilities and office supplies expense)7.(To reocrd factory insurance and factory utilities)8.(To record raw materials purchases)9.(To record direct materials and indrect materials used in production)10.(To apply overhead to work in process)11.(To record transfer of completed airplanes)12.(To record cost of airplanes sold)13.(To record sale of airplanes to customers)SHOW LIST OF ACCOUNTSLINK TO TEXTPrepare the appropriate T-accounts for Raw Materials Inventory, Work-in-Process Inventory, Finished Goods Inventory, Manufacturing Overhead Control, Cost of Goods Sold, and Sales, and record Maverick’s transactions for 2014. (Post entries in order presented in the problem. Round answers to 0 decimal places, e.g. 345,000.)Raw MaterialsBal.Bal.(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)Bal.Bal.Work in Process InventoryBal.Bal.(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)Bal.Bal.Finished Goods InventoryBal.Bal.(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)Bal.Bal.Manufacturing Overhead(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)Bal.Bal.Cost of Goods Sold(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)Sales Revenue(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)SHOW LIST OF ACCOUNTSLINK TO TEXTWas manufacturing under- or overapplied in 2014? By how much? (Round answer to 0 decimal places, e.g. 345,000.)Overheads UnderappliedOverapplied by$SHOW LIST OF ACCOUNTSLINK TO TEXTMake the adjusting entry necessary to close the under- or overapplied overhead to cost of goods sold. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 345,000.)Account Titles and ExplanationDebitCreditSHOW LIST OF ACCOUNTSLINK TO TEXTIf Maverick chooses instead to prorate under- or overapplied overhead, what would the adjusted balances be in Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold for 2014? (Round answers to 0 decimal places, e.g. 345,000 and percentage of total to 2 decimal places e.g. 34.52).Adjusted BalanceWork In Process$Finished Goods$Cost of Goods Sold$SHOW LIST OF ACCOUNTSLINK TO TEXTJob 3827 was started and completed in 2014. The job required 700 machine hours, 300 direct labor hours, and $79,000 in direct materials to complete. What was the total cost of this job? Using Maverick’s 80% markup, what sales price would be charged for this airplane? (Round answers to 0 decimal places, e.g. 345,000.)Total Cost$Sales Price$SHOW LIST OF ACCOUNTSLINK TO TEXTIf Maverick had chosen to use machine hours as its overhead application base, what would the rate have been in 2014? (Round answer to 2 decimal places, e.g. 2.45.)Predetermined rate$/ Machine hourLabour hour
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