Hawthorn Corporation manufactures custom all-terrain vehicles (ATVs) and uses a job costing system to assign and track costs.  March’s beginning inventory consisted of the following components:
	Raw materials	$         65,000
	Work in process	27,000
	Finished goods	80,000
The above beginning work in process consisted only of Job #02.778.  The finished goods inventory consisted of Job #01.987 ($42,500) and Job #02.665 ($37,500).
The following descriptions summarize the various transactions that occurred during March:
Purchased $112,000 of raw materials.
Used $117,000 of raw materials in the production process. Of this amount, $95,000 consisted of parts and other materials “directly” incorporated into ATVs.  The remainder was “indirect” material for shop supplies and small dollar items that are not otherwise traceable to specific ATVs.
Total wages and salaries were $225,000.  This total was 60% attributable to direct labor, 10% to indirect labor, 5% to sales commissions, and 25% to general and administrative activities.
Depreciation for the period totaled $28,000.  Of this amount, 75% related to factory and factory related equipment, and is contemplated in the factory overhead rates.  The other 25% is related to general and administrative activities.
Other general and administrative costs, excluding wages and depreciation, totaled $15,000.
Other factory overhead costs, excluding indirect materials, wages, and depreciation, totaled $35,500.
Hawthorn applies factory overhead at 75% of direct labor costs.
The ending work in process consisted of two jobs:  Job #03.004 ($25,500) and Job #03.772 ($21,500).  All completed units had been delivered to customers, and there was no ending finished goods inventory.  Sales for the month amounted to $625,000.  All sales are for cash at time of shipment.
(a)	Prepare T-accounts showing how the above costs flow through the accounting system.  For simplicity, you may assume that all expenditures and receipts settle in cash, and you will only need the following T-accounts:
	Raw Materials	Selling Expenses
	Work in Process	General & Administrative Expenses
	Finished Goods	Sales
	Cost of Goods Sold	Cash
	Factory Overhead	Accumulated Depreciation
(b)	Was overhead underapplied or overapplied?  What is the disposition of the difference between actual and applied factory overhead?
(c)	Prepare an income statement for March.   Income taxes of $50,000 were incurred during March.
(d)	Prepare summary journal entries to record March’s transactions.

(a)	Raw Materials		Factory Overhead
	Beg.	65,000	0	RM out		In. Mat.	0	0	App. OH
	Purch.	0				In. Lab.	0
		0	0			Depr.	0
						Other	0
	End	0				To Cogs	0
							0	0
	Work in Process		End	0
	Beg.	27,000	0	To FG
	Dir. Mat.	0
	Dir. Lab.	0				Selling Expenses
	App. OH	0				Comm.	0
		0	0				0	0
	End	0					0
	Finished Goods		General & Admin.
	Beg.	80,000	0	COGS		Salary	0
	In (WIP)	0				Depr.	0
		0	0			Other	0
							0	0
	End	0
							0
	Cost of Goods Sold
	From FG	0	0	Over OH		Sales
		0	0					0	Sales
							0	0
		0
								0
	Cash
	Sales		0	Pur. RM
			0	Payroll
			0	G&A
			0	OH/other
		0	0
	End	0
	Accumulated Depr.
			0	Depr.
		0	0
			0

(c)
	HAWTHORN CORPORATION
	Income Statement
	For the Month Ending March 31, 20XX
	Sales		$                    –
	Cost of goods sold		–
	Gross profit		$                    –
	Operating expenses
	Selling	$                    –
	General & administrative	–	–
	Income before income taxes		$                    –
	Income taxes		–
	Net income		$                    –

	GENERAL JOURNAL	Page 1
	Date	Accounts		Debit	Credit

 

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