Problem:
Scholastic Brass Corporation manufactures brass musical instruments for use by high school students. The company uses a normal costing system, in which manufacturing overhead is applied on the basis of direct-labor hours. The company's budget for the current year included the following predictions.
Budgeted total manufacturing overhead.............$426,300
Budgeted total direct-labor hours...................20,300
During March, the firm worked on the following two production jobs:
Job number T81, consisting of 76 trombones
Job number C40, consisting of 110 cornets
The events of March are described as follows:
a. One thousand square feet of rolled brass sheet metal were purchased on account for $5,000.
b. Four hundred pounds of brass tubing were purchased on account for $4,000.
c. The following requisitions were submitted on March 5:
Requisition number 112: 250 square feet of brass sheet metal at $5 per square foot (for job number T81)
Requisition number 113: 1,000 pounds of brass tubing, at $10 per pound (for job number C40)
Requisition number 114: 10 gallons of valve lubricant, at $10 per gallon
All brass used in production is treated as direct material. Valve lubricant is an indirect material.
d. An analysis of labor time cards revealed the following labor usage for March.
Direct labor: Job number T81, 800 hours at $20 per hour
Direct labor: Job number C40, 900 hours at $20 per hour
Indirect labor: General factory cleanup, $4,000
Indirect labor: Factory supervisory salaries, $9,000
e. Depreciation of the factory building and equipment during March amounted to $12,000.
f. Rent paid in cash for warehouse space used during March was $1,200.
g. Utility costs incurred during March amounted to $2,100. The invoices for these costs were received, but the bills were not paid in March.
h. March preoperty taxes on the factory were paid in cash, $2,400.
i. The insurance cost covering factory operations for the month of March was $3,100. The insurance policy had been prepaid.
j. The costs of salaries and fringe benefits for sales and administrative personnel paid in cash during March amounted to $8,000.
k. Depreciation on administrative office equipment and space amounted to $4,000.
l. Other selling and administrative expenses paid in cash during March amounted to $1,000.
m. Job number T81 was completed on March 20.
n. Half of the trombones in job number T81 were sold on account during March for $700 each.
The March 1 balances in selected accounts are as follows:
Cash.................................................$10,000
Accounts Receivable...................................21,000
Prepaid Insurance......................................5,000
Raw-Material Inventory...............................149,000
Manufacturing Supplies Inventory.........................500
Work-In-Process Inventory.............................91,000
Finished-Goods Inventory.............................220,000
Accumulated Depreciation: Buildings & Equipment......102,000
Accounts Payable......................................13,000
Wages Payable..........................................8,000
1. Calculate the company's predetermined overhead rate for the year.
2. Calculate the overapplied or underapplied overhead for March. Prepare a journal entry to close this balance into Cost of Goods Sold.
3. Prepare a schedule of cost of goods manufactured to March.
4. Prepare a schedule of cost of goods sold for March.
5. Prepare an income statement for March.
6. What is the cost of goods manufactured for March.
7. What is the amount of work in process inventory for March 31?
8. What is the Cost of goods sold for March?
9. What is the amount of the gross margin?
10. What is the amount of net income or net loss?