Gold Nest Company, is a family owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor hours worked. Its predetermined overhead rate is based on a cost formula that estimated $330,000 of manufacturing overhead for an estimated activity level of 1,500 direct labor hours, or $220 per direct labor hour. At the beginning of the year, the inventory balances were as follows: Raw Materials $ 25,000
Work in Process $ 10,000
Finished Goods $ 40,000
During the year, the following transactions were completed:
Raw Materials purchased for cash, $275,000.
Raw Materials used in production, $280,000 (materials costing $220,000 were charged directly to jobs, the remaining were indirect).
Raw Materials ending inventory balance, $20,000.
Cash paid to employees as follows:
Direct Labor (1,350 hours) $180,000
Indirect Labor $72,000
Sales Commissions $63,000
Administrative salaries $90,000
Cash paid for rent during the year was $18,000 ($13,000 of this amount related to factory operations, and $5,000 related to selling and administrative activities).
Cash paid for utility costs in the factory, $57,000.
Cash paid for advertising, $140,000.
Depreciation recorded on equipment, $100,000 ($88,000 of this amount related to equipment used in factory operations; the remaining $12,000 related to equipment used in selling and administrative activities).
Manufacturing overhead costs was applied to jobs, $ .
Goods that had costs $675,000 to manufacture according to their job cost sheets were completed.
Sales for the year (all paid in cash) totaled $1,250,000. The total cost to manufacture these goods according to their job cost sheets was $700,000.