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Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. A popular pastime among older Chinese men is to take their pet birds on daily excursions to teahouses and public parks where they meet with other bird owners to talk and play mahjong. A great deal of attention is lavished on these birds, and the birdcages are often elaborately constructed from exotic woods and contain poreclain feeding bowls and silver roosts. Gold Nest Company makes a broad range of birdcages that it sells through an extensive network of street vendors who receive commissions on their sales. The Chinese currency is the renminbi, which is denoted by Rmb. All of the company's transactions with customers, employees, and suppliers are conducted in cash; there is no credit.The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. At the beginning of the year, it was estimated that the total direct labor cost for the year would be Rmb200,000 and the total manufacturing overhead cost would be Rmb 330,000 . At the beginning of the year, the inventory balances were as follows:During the year, the following transactions were completed: a. Raw materials purchased for cash, Rmb 275,000 . b. Raw materials requisitioned for use in production, Rmb 280,000 (materials costing Rmb220,000 were charged directly to jobs; the remaining materials were indirect). c. Costs for employee services were incurred as follows: d. Rent for the year was Rmb 18,000 Rmb 13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, Rmb 57,000 . f. Advertising costs incurred, Rmb 140,000 . g. Depreciation recorded on equipment, Rmb 100,000. Rmb 88,000 of this amount was on equipment used in factory operations; the remaining Rmb 12,000 was on equipment used in selling and administrative activities.) h. Manufacturing overhead cost was applied to jobs, Rmb ________. i. Goods that had cost Rmb 675,000 to manufacture according to their job cost sheets were completed. j. Sales for the year totaled Rmb 1,250,000 . The total cost to manufacture these goods according to their job cost sheets was Rmb 700,000 .
(d) Prepare an income statement for the year. (Do not prepare a schedule of cost of goods manufactured; all of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.)

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These birds receive a lot of care, and their cages are frequently intricately built from exotic woods and furnished with silver roosts and porcelain food bowls. The Gold Nest Company manufactures a wide selection of birdcages that it distributes via a vast network of street sellers who are paid commissions on purchases. The renminbi, represented by the letter Rmb, is the currency of China.

Finished goods Inventory                                                  550000

What is  balance in the Manufacturing Overhead account to Cost ?

  • At the end of the year, any remaining balance in the manufacturing overhead account (over or under-applied manufacturing overhead) is either distributed among the cost of finished goods, cost of work in progress, and cost of goods sold accounts, or the entire balance is transferred to the cost of goods sold account.
  • Manufacturing overhead, also known as factory overhead, factory burden, and manufacturing support costs, describes the unavoidable expenses a business faces when producing a good. To value and report Inventory and Cost of Goods Sold in accordance with generally accepted accounting standards, the cost of manufacturing overhead must also be allocated to each unit produced in addition to expenditures like direct material and direct labor (GAAP).
  • Manufacturing expenses include items like the power needed to run the firm's machinery, the building's depreciation, the cost of manufacturing supplies, and the wages of factory workers (other than direct labor). The determination of a product's profitability depends on how these expenses are allocated to various products.
  • Nonmanufacturing costs, often known as administrative overhead, are expenditures incurred by a company that are unrelated to the actual manufacturing process. Selling, General and Administrative (SG&A) Costs and Interest Expense are examples of non-manufacturing costs in accounting and financial jargon. These costs are not included in inventory or the cost of products sold since accounting procedures do not see them as product costs. Instead, at the moment of incurrence, nonmanufacturing expenditures are only recorded as expenses on the income statement.

Trn.  Account Titles                      Debit (Rmb)               Credit(Rmb)

a) Raw Material Inventory           150000 Cash                             150000

b) Work in process Inventory         135000                          

Manufacturing overhead                23000  

Raw material Inventory                                                     158000

c) Work in process Inventory      100000  

Manufacturing overhead             40000  

Sales commision                         22000  

Salaries expense                        35000  

Cash                                                                                   197000

d) Manufacturing overhead         30000  

Rent Expense                             6000  

Cash                                                                                    36000

e) Manufacturing overhead           90000  

Cash                                                                                   90000

f) Advertising Expense                88000  

Cash                                                                                    88000

g) Manufacturing overhead         66000  

Depreciation Expense               14000  

Accumulated depreciation                                              80000

h) Work in process Inventory 250000  

Manufacturing overhead                                                250000

[275,000/110,000] × 100,000 (Direct labor)    

i) Finished goods                          490000  

Work in process Inventory                                                 490000

j) Accounts Receivable                  995000  

Sales                                                                                 995000

   

j. Cost of goods sold                     550000  

Finished goods Inventory                                                  550000

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