Abbott Lamp Corporation manufactures BOTH Mountain Dew Lamps AND Coca-Cola

Lamps, starts 1/1/19. On 1/1/19, Erin Rogers ESTIMATES the following MOH costs:
Utilities $4,000
Grease $1,000
Rent $3,600
Depreciation $1,200
$9,800
Erin Rogers also estimates a total of 2,000 direct labor hours for the year and ALC
applies MOH costs using DLH (or direct labor hours).
1. Compute the Predetermined Overhead Rate.
Predetermined Overhead Rate = Estimated annual overhead $/ Estimated annual
allocation base
= $ 9800/2000
= $4.9 / DLH
2. On 1/1/19, ALC obtains a lamp-making machine for $6000 – on account. It has a 0
salvage value and a useful life of 5 years. Please give the journal entry to describe
this transaction.

Equipment $6,000
Account payable $6,000

3. On 1/1/19, ALC purchases – on account – 1000 Mountain Dew Cans for $10,000. It
also purchases – on account – 2000 Coca-Cola Cans for $40,000 and 1,000 pounds of
grease for $80,000. Please give the journal entry to record this transaction.

Inventory (1000*10) – MDC $10,000

Account payable $10,000
Inventory (1000*10) – CCC $40,000
Account payable $40,000
RMI Grease (1000*80) $80,000
Account payable $80,000

4. On 1/1/19, ALC purchases – on account – 1,000 pieces of paper for $10,000. Please
give the journal entry to describe this transaction.

RMI Paper (1000*10) – MDC $10,000

Account payable $10,000
5. On 1/5/19, ALC mountain dew lamp workers requisitioned out 100 Mountain dew
cans and 20 pieces of paper. Please give the journal entry to describe this transaction.

WIP (MDC) $1,200

RMI (MDC) (10*100) $1,000
RMI (Paper) (20*10) $200
6. On 1/5/19, ALC coca-cola lamp workers requisitioned out 200 coca-cola cans and
100 pieces of paper. Please give the journal entry to describe this transaction.

WIP (CCC) $5,000

RMI (CCC) (200*20) $4,000
RMI (Paper) (100*10) $1000
7. On 1/15/19, ALC mountain dew lamp workers requisitioned out 10 pounds of grease
(and remember, the grease helps to make BOTH Mountain Dew Lamps and Coca-
cola lamps). Please give the journal entry to describe this.

MOH $800
RMI grease $800

8. During January, ALC workers worked the following:

a. Mountain Dew Lamp workers => 100 dlh and they are paid $10/dlh IN CASH
;
b. Coca-Cola Lamp workers => 80 dlh and they are paid $25/dlh IN CASH.

WIP (MDL) (100*10) $1,000

WIP (CCL) (80*25) $2,000
Cash (Wages) $3,000

9. Please give the journal entry to APPLY overhead for the month of January.

WIP (MDL) (100*4.9) $490

WIP (CCL) (80*4.9) $392
MOH $882

10. Please create TWO January JOB COST SHEETS (one Mountain Dew Lamps; one
Coca-Cola Lamps) and compute cost per Mountain Dew Lamp and Coca Cola lamp.

Mountain Dew Lamps (January) Coca-cola Lamps (January)

Direct Materials $1,200 Direct Materials $5,000
Direct Labor $1,000 Direct Labor $2,000
MOH (applied) $490 MOH (applied) $392
MDL (January) $2,690 COGM CCL (January) $7,392
Cost / MDL $100 Cost/ MDL $200
Cost per MDL $26.9 Cost per MDL $36.96
11. On 1/31, ALC receives its January utility bill for $1,000 and pays for it in CASH.
These utilities pertain to the manufacturing facility. Please give the journal entry.

MOH $1,000
Cash (Utility payable) $1,000

12. On 1/31, ALC receives its monthly rent bill for its manufacturing facility for $300
and pays for it in CASH. This rent pertains to the manufacturing facility. Please give
the journal entry.

MOH $300
Cash (Rent) $300

13. On 1/31, ALC makes it monthly depreciation entry for the lamp-making equipment.
Straight line depreciation of a $6,000 asset over 5 years is $1,200 per year or….$100
per month. Please give the appropriate depreciation journal entry for the month of
January.

WIP (MDL & CCL) $100

Accumulated Depreciation $100

14. On 1/31, ALC workers completed 100 Mountain Dew Lamps and 200 Coca-cola
lamps AND all 100/200 Mountain Dew/Coca-cola lamps were transferred to the
finished goods. To give the journal entry, utilize the two separate Job Cost Sheets
you completed earlier.

FGI (MDL) $2,690

FGI (CCL) $7,392
WIP (MDL) $2,690
WIP (CCL) $7,392

15. On 2/1, ALC sold all 100 Mountain Dew Lamps it made in January – on account –
for $50/lamp. Please give the journal entry.

Account Receivable (100*50) $5,000

Sales Revenue $5,000
COGS (100*26.9) $2,690
FGI (MDL) $2,690

16. On 2/1, ALC all sold 200 Coca-cola lamps it made in January – for CASH – for
$100/lamp. Please give the appropriate journal entry.

Account Receivable (200*100) $20,000

Sales Revenue $20,000
COGS (200*36.96) $7,392
FGI (CCL) $7,392
RESULTS FOR THE REMAINDER OF THE YEAR
17. During February – December 31, ALC Mountain Dew Lamp workers, requisitioned
out 800 Mountain Dew Cans and 160 pieces of paper. Give the journal entry to
describe this transaction.

WIP (MDL) $9,600

RMI (MDL) (800*10) $8,000
RMI (Paper) (160*10) $1,600

18. During February – December 31, ALC Coca-Cola Lamp workers requisitioned out
600 Coca-Cola cans and 300 pieces of paper. Give the journal entry.

WIP (CCL) $15,000

RMI (CCL) (600*20) $12,000
RMI (Paper) (300*10) $3,000

19. During February – December 31, ALC paid the following to its workers:

Mountain Dew Lamp workers for direct labor (800 dlh * $10/dlh) $8,000
Coca-Cola Lamp workers (240 dlh * $25/dlh) $6,000

These were paid for in CASH. Please give the journal entry.

WIP (MDL) $8,000

WIP (CCL) $6,000
Cash/Wages payable $14,000

20. Give the journal entry to APPLY overhead from February – December 31.

WIP (MDL) (800*4.9) $3,920

WIP (CCL) (240*4.9) $1,176
MOH $5,096

21. The Mountain Dew Lamp workers started and completed all 800 Mountain Dew
Lamps from February – December 31. The 800 Mountain Dew Lamps were
transferred to finished goods. Give the journal entry to describe this transaction.
Once again, create a job cost sheet for these 800 mountain Dew lamps.

FGI (MDL) $21,520

WIP (MDL) $21,520

Mountain Dew Lamp (February – December 31)

Materials $9,600
Direct Labor $8,000
 MOH (applied) 3,920
COGM MDL $21,520
Cost / MDL $800
Cost per MDL $26.9

22. Coca-cola Lamp workers started and completed all 600 Coca-Cola Lamps from
February – December 31. The 600 Coca-cola Lamps were transferred to finished
goods. Give the journal entry to describe this transaction. Once again, create a job
cost sheet for these 600 Coca-cola lamps.
FGI (CCL) $22,176
WIP (CCL) $22,176

Coca-cola Lamp (February – December 31)

Materials $15,000
Direct Labor $6,000
MOH (applied) $1,176
COGM (CCL) $22,176
Cost / CCL $600
Cost per CCL $36.96

23. During February – December 31, ALC made 11 monthly depreciation journal entries
totaling $1,100 for its lamp-making equipment. Give the journal entry.

WIP (MDL & CCL) $1,100

Account Depreciation $1,100

24. During February – December 31, ALC made 11 CASH payments for rent totaling
$3,300. Give the journal entry.

MOH $3,300
Cash (Rent) $3,300

25. During February – December 31, ALC made 11 CASH payments for utilities totaling
$1,200. These utilities pertain to the manufacturing plant. Please give the journal
entry.

MOH $1,200
Cash (Utility payable) $1,200
26. During February – December 31, ALC sold 500 Mountain Dew Lamps for $50/lamp
(or $25,000 total) in CASH. Give the journal entry to describe this transaction.

Cash (500*50/ MDL) $25,000

Sales revenue $25,000

COGS (500*26.9/MDL) $13,450

 FGI (MDL) $13,450

27. During February – December 31, ALC sold 500 Coca-Cola Lamps for $100/lamp (or
$50,000) in CASH. Give the journal entry to describe this transaction.

Cash (500*100/ CCL) $50,000

Sales revenue $50,000

COGS (500*36.96/CCL) $18,480

FGI (CCL) $18,480

28. During the year, ALC paid CASH for the following PERIOD COSTS:

Salaries at corporate headquarters $20,000

Rent on corporate headquarters $20,000

Please give the journal entry to describe this.

Salary expense / SG &A expense $20,000

Rent expense / SG &A expense $20,000
Cash $40,000

29. Create your MOH clearing t-account. Here are some hints:

a. Remember, the MOH clearing account will have a zero beginning balance.
b. Your MOH clearing account will have ACTUAL January MOH on the debit
side and APPLIED January MOH on the credit side. It will also have
ACTUAL February – December 31 MOH on the debit side and APPLIED
February – December 31 MOH on the credit side.

Is MOH OVER or UNDER-applied at 12/31? IF so, indicate by how much.

Actual Applied
RMI Grease $800 $490 MDL Applied MOH
Cash/Utilities payable $1,000 $392 CCL Applied MOH
Cash/rent $300 $3,920 MDL Applied MOH
Cash/rent $3,300 $1,176 CCL Applied MOH
Cash/Utilities payable $1,200
$6,600 $5,978

Thus, we underapplied MOH and our MDLs & CCLs are cost more than we thought
by $622.
30. Please make the appropriate journal entry to close out any over/under-applied MOH
to COGS at 12/31.

MOH $622
COGS $622

31. Using your prior journal entries create a 5-line income statement for 2019

SALES $100,000
COGS $42,012
Gross Margin $57,988
Period costs $47,000
Operating Income $10,988