Aries Corporation manufactures eighteenth-century, classical-style furniture. It uses a job costing system that applies factory overhead on the basis of direct labor-hours. Budgeted factory overhead for the year 2014 was P1,235,475, and management budgeted 86,700 direct labor-hours. These transactions were recorded during August:
- Purchased 5,000 square feet of oak on account at P25 per square foot.
- Purchased 50 gallons of glue on account at P36 per gallon (indirect material).
- Requisitioned 3,500 square feet of oak and 30.5 gallons of glue for production.
- Incurred and paid payroll costs of P187,900. Of this amount, P46,000 were indirect labor costs; direct labor personnel earned P22 per hour on average.
- Paid factory utility bill, P15,230 in cash.
- August’s insurance cost for the manufacturing property and equipment was P3,500. The premium had been paid in March.
- Incurred P8,200 depreciation on manufacturing equipment for August.
- Recorded P2,400 depreciation on an administrative asset.
- Paid advertising expenses in cash, P5,500.
- Incurred and paid other factory overhead costs, P13,500.
- Incurred miscellaneous selling and administrative expenses, P13,250.
- Applied factory overhead to production on the basis of direct labor-hours.
- Completed goods costing P146,000 manufactured during the month.
- Made sales on account in August, P132,000. The cost of goods sold was P112,000.
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- Compute the firm’s predetermined factory overhead rate for the year.
- Prepare journal entries to record the August events.
- Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Sold account on August 31, 2019.
- Prepare a schedule of cost of goods manufactured and sold.
- Prepare the income statement for August.