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The transactions below pertain to KoolFix Inc. which manufactures residential heating systems. The company has just been established and hence had no opening inventories.

a)

Purchased $35,000 in raw materials on credit.

b)

Requisitioned $22,000 in materials for production. 10% were indirect materials, the rest were direct materials.

c)

Liabilities amounting to $52,000 were recorded for miscellaneous overhead costs.

d)

At the end of the month, the liability for total salaries and wages amounted to $120,000. Of this amount, 60% were direct labour and the rest was indirect labour.

e)

Manufacturing overhead is applied to production according to direct labour hours. Estimated overhead costs at the beginning of the year were $420,000 and estimated machine hours were 400,000 hours.

Estimated direct labour hours were 200,000 hours. Actual machine hours worked this time period were 42,000 and actual labour hours were 24,000 hours. Record the entry to apply overhead to production.

f)

All jobs in process were completed in the month and shipped out to customers.

g)

Close out the over-or under-applied overhead account appropriately.

Required:

A.

Record the above transactions to T-accounts. You can use the below template, but you will need to set up your own accounts and decide on account titles. Make sure you label your entries a) etc.

B.

Calculate the Cost of Goods Sold for the period.

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