Philly Rug Company Produces Designer Rugs for Clients

Essay

Philly Rug Company produces designer rugs for clients. The standard size rug will require 3
yards of direct materials (DM), 1 hour of direct labor (DL) time, and 2 hours of machine time. MOH costs are applied based on machine hours. DM is expected to cost $8.00 per yard, DL is budgeted at $12 per hour, and cost of machine time is estimated at $3/machine hour for variable-MOH and $2/machine hour for fixed-MOH. The company purchased 30 yards of materials on account for $255. Production was started on 5 rugs, using 15 yards of direct materials, 6 direct labor hours at a total cost of $66, and 10 machine hours. Prepare the journal entries for the purchase of the materials and the costs incurred in production of the 5 rugs assuming Philly Rug Company uses standard costing. (Credit MOH costs to Accounts Payable)