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Category > Accounting Posted 08 Aug 2017 My Price 15.00

Maverick Wings, Inc.

Problem 4-30

Maverick 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   $1,079,000  
Estimated machine hours   44,000  
Estimated direct labor hours   9,000  
Estimated direct materials cost   $1,520,000  

Maverick’s inventory count, completed on December 31, 2013, revealed the following ending inventory balances:
Raw Materials Inventory   $250,000  
Work in Process Inventory   $625,000  
Finished Goods Inventory   $1,240,000  

The company’s 2014 payroll data revealed the following actual payroll costs for the year:
Job Title   Number
Employed		   Wage Rate
per Hour		   Annual
Salary per
Employee		   Total Hours
Worked per
Employee		  
President and CEO   1       $228,000      
Vice president and CFO   1       $178,000      
Factory manager   1       $40,500      
Assistant factory manager   1       $30,600      
Machine operator   5   $14.50       2,250  
Security guard, factory   2       $20,600      
Materials handler   2   $7.50       2,000  
Corporate secretary   1       $35,800      
Janitor, factory   2   $6       2,150  

The following information was taken from Maverick’s Schedule of Plant Assets. All assets are depreciated using the straight-line method.
Plant Asset   Purchase Price   Salvage Value   Useful Life  
Factory building   $4,000,000   $150,000   20 Years  
Administrative office   $650,000   $125,000   30 Years  
Factory equipment   $2,000,000   $20,000   12 Years  

Other miscellaneous costs for 2014 all paid in cash included:
Cost   Amount  
Factory insurance   $12,200  
Administrative office utilities   $5,800  
Factory utilities   $33,100  
Office supplies   $4,500  

Additional 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 cost
 

SHOW LIST OF ACCOUNTS
LINK TO TEXT
Prepare 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 Explanation Debit Credit
1.
 
  (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 ACCOUNTS
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Prepare 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 Materials
Bal. 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 Inventory
Bal. 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 Inventory
Bal. 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 ACCOUNTS
LINK TO TEXT
Was manufacturing under- or overapplied in 2014? By how much? (Round answer to 0 decimal places, e.g. 345,000.)
Overheads UnderappliedOverapplied by $
 

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Make 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 Explanation Debit Credit
 

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If 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 Balance
Work In Process $
Finished Goods $
Cost of Goods Sold $
 

SHOW LIST OF ACCOUNTS
LINK TO TEXT
Job 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 $
 

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LINK TO TEXT
If 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

Answers

Maurice Tutor
(5)
Status NEW Posted 08 Aug 2017 04:08 PM My Price 15.00

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