I-19.02 Hawthorn Corporation manufactures custom all-terrain vehicles (ATVs) and uses a job
costing system to assign and track costs. March's beginning inventory consisted of the
following components:
Raw materials $ 65,000 Work in process 27,000 Finished goods 80,000 The above beginning work in process consisted only of Job #02.778. The finished
goods inventory consisted of Job #01.987 ($42,500) and Job #02.665 ($37,500).
The following descriptions summarize the various transactions that occurred during
March:
Purchased $112,000 of raw materials.
Used $117,000 of raw materials in the production process. Of this amount,
$95,000 consisted of parts and other materials "directly" incorporated into ATVs.
The remainder was "indirect" material for shop supplies and small dollar items
that are not otherwise traceable to specific ATVs.
Total wages and salaries were $225,000. This total was 60% attributable to
direct labor, 10% to indirect labor, 5% to sales commissions, and 25% to general
and administrative activities.
Depreciation for the period totaled $28,000. Of this amount, 75% related to
factory and factory related equipment, and is contemplated in the factory
overhead rates. The other 25% is related to general and administrative
activities.
Other general and administrative costs, excluding wages and depreciation,
totaled $15,000.
Other factory overhead costs, excluding indirect materials, wages, and
depreciation, totaled $35,500.
Hawthorn applies factory overhead at 75% of direct labor costs.
The ending work in process consisted of two jobs: Job #03.004 ($25,500) and Job
#03.772 ($21,500). All completed units had been delivered to customers, and there
was no ending finished goods inventory. Sales for the month amounted to $625,000.
All sales are for cash at time of shipment. I-19.02 (a) Prepare T-accounts showing how the above costs flow through the accounting
system. For simplicity, you may assume that all expenditures and receipts
settle in cash, and you will only need the following T-accounts: Raw Materials
Work in Process
Finished Goods
Cost of Goods Sold
Factory Overhead Selling Expenses
General & Administrative Expenses
Sales
Cash
Accumulated Depreciation (b) Was overhead underapplied or overapplied? What is the disposition of the
difference between actual and applied factory overhead? (c) Prepare an income statement for March.
incurred during March. (d) Prepare summary journal entries to record March's transactions. Income taxes of $50,000 were Name:
Date: (a) I-19.02(a,b) Section: Raw Materials
Beg.
Purch. 65,000 0 RM out 0
0 End Factory Overhead 0 0 In. Mat. 0 In. Lab. 0 Depr. 0 Other 0 To Cogs 0
0 Work in Process
Beg. 27,000 Dir. Mat. 0 Dir. Lab. 0 App. OH 0
0 End End
0 In (WIP) Comm.
0 0 0
0 General & Admin.
0 COGS 0 Salary 0 Depr. 0 Other 0
0 End 0 0 0
0 0 Selling Expenses 0 80,000 App. OH To FG Finished Goods
Beg. 0 0 0
0
Cost of Goods Sold From FG 0 0Over OH 0 0 Sales
0
0 0 0
0 Sales Name:
Date: Section: Cash
Sales 0 Pur. RM
0 Payroll
0 G&A 0 H/other
0
End 0 0 Accumulated Depr.
0
0 0
0 Depr. I-19.02(a,b) Name:
Date: (b) Section: I-19.02(a,b) Name:
Date: I-19.02(c) Section: (c)
HAWTHORN CORPORATION
Income Statement
For the Month Ending March 31, 20XX
$ Sales ###
- ### Cost of goods sold
$ Gross profit ### Operating expenses
Selling
General & administrative
Income before income taxes $ - $ Income taxes
Net income - $ - Name:
Date: I-19.02(d) Section: GENERAL JOURNAL Date Page 1
Accounts Debit Credit Name:
Date: I-19.02(d) Section: GENERAL JOURNAL Date Page 2
Accounts Debit Credit

 

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