The Sierra Inc uses job order costing system. The company uses machine hours to a

The Sierra Inc uses job order costing system. The company uses machine hours to apply overhead cost to jobs. At the beginning of 2016, the company estimated that 150,000 machine hours would be worked and $900,000 overhead cost would be incurred during 2016.
The balances of raw materials, work in process (WIP), and finished goods at the beginning of 2016 were as follows:
Raw materials
Work in process
Finished goods
The Fine manufacturing company recorded the following transactions during 2016:
Raw materials purchased on account, $820,000.
Raw materials were requisitioned for use in production, $760,000 ($720,000 direct materials and $40,000 indirect materials).
Direct labor, $150,000; indirect labor, $220,000; sales commission, $180,000; and administrative salaries, $400,000.
Sales travel costs were $34,000.
Utility costs incurred in the factory, $86,000.
Advertising expenses were $360,000.
Depreciation for the year was $700,000 ($560,000 relates to factory and $140,000 relates to selling and administrative activities).
Insurance expired during the year, $20,000 ($14,000 relates to factory operations and $6,000 relates to selling and administrative activities).
Fine manufacturing company worked 160,000 machine hours. Manufacturing overhead was applied to production.
Goods costing $1,800,000 were completed during the year.
The goods costing $1,740,000 were sold to customers for $3,000,000.
Prepare journal entries, T-accounts and income statement (Links to an external site.)Links to an external site. from the above information.

Expert Answer

Preparation of journal entries:

No. Account Head Debit Credit
a. Raw Materials              820,000
     Accounts Payable              820,000
b. Work in Process              720,000
Manufacturing Overhead                40,000
     Raw Materials              760,000
c. Work in Process              150,000
Manufacturing Overheads              220,000
Sales Commission Expenses              180,000
Administrative Salaries Expenses              400,000
     Salaries and Wages Payable              950,000
d. Sales travel expenses                34,000
      Accounts Payable                34,000
e. Manufacturing Overheads                86,000
      Accounts Payable                86,000
f. Advertising Expenses              360,000
      Accounts Payable              360,000
g. Manufacturing Overheads              560,000
Depreciation Expenses              140,000
     Accumulated Depreciation              700,000
h. Manufacturing Overheads                14,000
Insurance Expenses                  6,000
     Prepaid Insurance                20,000
i. Work in Process              960,000
     Manufacturing Overhead              960,000
(Note 1)
j. Finished Goods          1,800,000
     Work in Process          1,800,000
k. Accounts Receivable          3,000,000
     Sales          3,000,000
Cost of goods sold          1,740,000
     Finished Goods          1,740,000

Note 1:

Manufacturing overhead is applied to production by multiplying actual direct labor or machine hours worked during the year and predetermined overhead rate computed at the beginning of the year. It is shown as follows:

Predetermined Overhead Rate = (Estimated Manufacturing Overhead cost / Estimated total units in the allocation base)

Predetermined Overhead rate = $900,000 / 150,000 machine hours

Predetermined Overhead rate = $6 per machine hour

Manufacturing overhead applied to production = Actual machine hours * Predetermined overhead rate

Manufacturing overhead applied to production = 160,000 hours * $6 per hour

Manufacturing overhead applied to production = $960,000



Accounts Receivable Raw Materials Finished Goods
(k)       3,000,000 Bal.       40,000 (b)       760,000 Bal.       60,000 (k)       1,740,000
(a)         820,000 (j)          1,800,000
Work in Process Accounts Payable Manufacturing Overhead
Bal.       30,000 (j)       1,800,000 (a)       820,000 (b)       40,000 (i)       960,000
(b)         720,000 (d)       34,000 ©        220,000
©           150,000 € 86,000 € 86,000
(i)           960,000 (f)       360,000 (g)       560,000
(h)       14,000
Prepaid Insurance Accumulated Depreciation Salaries and Wages Payable
(h)       20,000 (g)       700,000 ©         950,000
Sales Administrative Salary Expenses Sales Commission Expense
(k)       3,000,000 ©        400,000 ©         180,000
Advertising Expense Depreciation Expense Sales Travel Expense
(f)       360,000 (g)        140,000 (h)       34,000
Cost of goods Sold Insurance Expense
(k)     1,740,000 (d)       6,000


Income Statement:


Fine Manufacturing Company
Income Statement
For the Year Ended December 31, 2016
Sales           3,000,000
Less: Cost of goods sold*           1,700,000
Gross Profit         1,300,000
Less: Selling and administrative expense:
     Commission Expense          180,000
     Administrative Salaries Expense          400,000
     Sales Travel Expense             34,000
     Advertising Expense          360,000
     Depreciation Expenses          140,000
     Insurance Expenses               6,000           1,120,000
Net Operating Income              180,000

*Cost of goods sold = $1,740,000 – $40,000 over applies manufacturing overheads

Buy Essay
Calculate your paper price
Pages (550 words)
Approximate price: -

Help Me Write My Essay - Reasons:

Best Online Essay Writing Service

We strive to give our customers the best online essay writing experience. We Make sure essays are submitted on time and all the instructions are followed.

Our Writers are Experienced and Professional

Our essay writing service is founded on professional writers who are on stand by to help you any time.

Free Revision Fo all Essays

Sometimes you may require our writers to add on a point to make your essay as customised as possible, we will give you unlimited times to do this. And we will do it for free.

Timely Essay(s)

We understand the frustrations that comes with late essays and our writers are extra careful to not violate this term. Our support team is always engauging our writers to help you have your essay ahead of time.

Customised Essays &100% Confidential

Our Online writing Service has zero torelance for plagiarised papers. We have plagiarism checking tool that generate plagiarism reports just to make sure you are satisfied.

24/7 Customer Support

Our agents are ready to help you around the clock. Please feel free to reach out and enquire about anything.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.


Let us write that nagging essay.


Submit Your Essay/Homework Instructions

By clicking on the "PLACE ORDER" button, tell us your requires. Be precise for an accurate customised essay. You may also upload any reading materials where applicable.


Pick A & Writer

Our ordering form will provide you with a list of writers and their feedbacks. At step 2, its time select a writer. Our online agents are on stand by to help you just in case.


Editing (OUR PART)

At this stage, our editor will go through your essay and make sure your writer did meet all the instructions.


Receive your Paper

After Editing, your paper will be sent to you via email.

× How can I help you?