Froya Fabrikker A/S of Bergen, Norway, is a small company that
manufactures specialty heavy equipment for use in North Sea oil
fields. The company uses a job-order costing system that applies
manufacturing overhead cost to jobs on the basis of direct
labor-hours. Its predetermined overhead rate was based on a cost
formula that estimated $349,800 of manufacturing overhead for an
estimated allocation base of 1,060 direct labor-hours. The
following transactions took place during the year:
Raw materials purchased on account, $230,000.
Raw materials used in production (all direct materials),
Utility bills incurred on account, $65,000 (85% related to
factory operations, and the remainder related to selling and
Accrued salary and wage costs:
Direct labor (1,135 hours)
Selling and administrative salaries
Maintenance costs incurred on account in the factory,
Advertising costs incurred on account, $142,000.
Depreciation was recorded for the year, $90,000 (75%
related to factory equipment, and the remainder related to selling
and administrative equipment).
Rental cost incurred on account, $115,000 (80%
related to factory facilities, and the remainder related to selling
and administrative facilities).
Manufacturing overhead cost was applied to jobs,
$ ? .
Cost of goods manufactured for the year,
Sales for the year (all on account) totaled
$1,500,000. These goods cost $860,000 according to their job cost
The balances in the inventory accounts at the beginning of the
Work in Process
1. Prepare journal entries to record the preceding
2. Post your entries to T-accounts. (Don’t forget to enter the
beginning inventory balances above.)
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a journal entry to close any balance in the
Manufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.
Froya Fabrikker A/S Schedule of Cost of Goods Manufactured Direct materials: Total raw materials available Materials used in production Total manufacturing costs Cost of goods manufactured