The Morocco Company Uses a Standard Cost Accounting System and Estimates

question 151

Essay

The Morocco Company uses a standard cost accounting system and estimates production for the year to be 60,000 units. At this volume, the company's variable overhead costs are $0.50 per direct labor hour.
The company's single product has a standard cost of $30.00 per unit. Included in the $30.00 is $13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information for the month of March follows:
$$\begin{array} { l r } \text { Nurnber of units produced } & 4,500 \\\text { Materials purchased (13,300yards) } & \$ 61,600 \\\text { Materials used in production (yards) } & 13,300 \\\text { Variable overhead costs incurred } & \$ 4,380 \\\text { Fixed overhead costs incured } & \$ 20,400 \\\text { Direct labor cost incurred (\$6.25/hour) } & \$ 75,750\end{array}$$
Required:
Prepare the journal entries to record the following:
a. Purchase and use of direct materials (Assume materials are used as purchased and no inventory is maintained).
b. Recognition of direct labor.
c. Incurring actual overhead.
d. Application of overhead to production.
e. Closing of overhead accounts and recognizing variances.
f. Transferring production to finished goods.

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Definitions:

In Utero

A Latin term referring to the period when an embryo or fetus is inside the uterus.

Catholic

Relating to the Roman Catholic Church, its teachings, practices, and beliefs.

Yom Kippur

The holiest day in Judaism, marked by fasting and atonement, observed with intensive prayer and repentance.

Parenterally

The administration of medication or nutrition by injection through routes other than the digestive tract, such as intravenously, intramuscularly, or subcutaneously.