90.2K

Verified Solution

Link Copied!

ABC Company manufactures only one product and uses a standard cost system. The company uses a plant wide predetermined overhead rate that relies on direct labor-hours as the allocation base. The predetermined overhead rate is based on a cost formula that estimated $2,880,000 of fixed and variable manufacturing overhead for an estimated allocation base of 240,000 direct labor-hours. Phoenix does not maintain any beginning or ending work in process inventory.

The companys beginning balance sheet is as follows:

ABC Company
Balance Sheet
1/1/XX
(dollars in thousands)
Assets
Cash	$	1,200
Raw materials inventory		300
Finished goods inventory		540
All other assets		12,000
Total assets	$	14,040
Liabilities and Equity
Retained earnings	$	14,040
Total liabilities and equity	$	14,040

The companys standard cost card for its only product is as follows:

Inputs	(1) Standard Quantity or Hours	(2) Standard Price or Rate			Standard Cost (1) (2)
Direct materials	3 pounds	$	25.00	per pound	$	75.00
Direct labor	2.00 hours	$	16.00	per hour		32.00
Variable manufacturing overhead	2.00 hours	$	2.00	per hour		4.00
Total standard cost per unit					$	111.00

During the year ABC completed the following transactions:

1. Purchased (with cash) 460,000 pounds of raw material at a price of $26.50 per pound.
2. Added 430,000 pounds of raw material to work in process to produce 125,000 units.
3. Assigned direct labor costs to work in process. The direct laborers (who were paid in cash) worked 265,000 hours at an average cost of $15.00 per hour to manufacture 125,000 units.
4. Applied variable manufacturing overhead to work in process inventory using the variable portion of the predetermined overhead rate multiplied by the number of direct labor-hours allowed to manufacture 125,000 units. Actual variable manufacturing overhead costs for the year (all paid in cash) were $480,000.
5. Transferred 125,000 units from work in process to finished goods.
6. Sold (for cash) 123,000 units to customers at a price of $175 per unit.
7. Transferred the standard cost associated with the 123,000 units sold from finished goods to cost of goods sold.
8. Paid $3,300,000 of selling and administrative expenses.
9. Closed all standard cost variances to cost of goods sold.

Question

2. Record transactions a through i for ABC Company.

Answer & Explanation Solved by verified expert

See Answer