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Option #1: Classification of Costs

Hoover, Inc., uses a job-order coding system.  The company’s inventory balances on February 1, the start of its fiscal year, were as follows:

Raw Materials Inventory


Work in Process Inventory


Finished Goods Inventory


During the year, the following transactions were completed:

  1. Raw materials were purchased on account, $215,221.
  2. Raw materials were issued from the storeroom for use in production, $198,000 (70% direct and 30% indirect).
  3. Employee salaries and wages were accrued as follows:  direct labor, $243,300; indirect labor, $98,750; and selling and administrative salaries, $72,340.
  4. Utility costs were incurred in the factory, $79,233.
  5. Advertising costs were incurred, $110,600.
  6. Prepaid insurance expired during the year, $35,000 (80% related to factory operations, and 20% related to selling and administrative activities).
  7. Depreciation was recorded, $192,100 (75% related to factory assets, and 25% related to selling and administrative assets).
  8. Manufacturing overhead was applied to jobs at the rate of 160% of direct labor cost.
  9. Goods that cost $720,200 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.
  10. Sales for the year totaled $1,293,300 and were all on account.  The total cost to manufacture these goods according to their job cost sheets was $725,825.


Submit your assignment as an Excel spreadsheet with each tab labeled by item number. Demonstrate the following:

  1. Prepare the journal entries to record the transactions for the year.
  2. Prepare the T-accounts for raw materials inventory, work in process inventory, finished goods inventory, manufacturing overhead, and cost of goods sold.  Don’t forget to enter the beginning balances in the inventory accounts.
  3. Is manufacturing overhead underapplied or overapplied for the year?  Prepare a journal entry to close this balance to cost of goods sold.

Provide your answers in a clearly organized Excel spreadsheet. Check spelling and formatting for readability. Where applicable, written comments must be in accordance with the CSU-Global Guide to Writing and APA Requirements Be sure to review the Module 2 Critical Thinking grading rubric, which may be accessed through the Course Information page.

Your assignment should meet the following requirements:

  • 2-3 pages in length, include a title sheet
  • Formatted according to CSU-Global standards
  • Document your sources