Question

P20-1B Saced Manufacturing ngah order costs manufacturing uses a job order cost system and anglies overhead to production on the basis of direct labor hours, On January 1 2012 Lob No 75 was the only antary 1, 2012. Job No. 25 was the only job in process. The costs incurred prior to January 1 on this job were as direct materials $10,000; direct labor $6,000, and manufacturing overhead S9,000. Job No. 23 had been pleten al il cost of $42.000 and was part of finished goods inventory. There was a $5,000 balance in the Raw Materials Inventory account ng the month of January, the company began production on Jobs 26 and 27 and completed Jobs 25 and 26. Jobs 23 and 25 were sold on account during the month for $62.000 and $74,000, respectively. The following additional events occurred during the month 1. Purchased additional raw materials of $40,000 on account 2. Incurred actory Inbor costs of 531,500. Or this amount. $7,500 related to employer payroll taxes 3. Incurred manufacturing overhead costs as follows: Indirect materials $10,000, indirect labor $7.500, depreciation expense on equipment $12,000, and various other manufacturing overhead costs on account S11,000 4. Assigned direct materials and direct labor to jobs as follows. Job No. Direct Materials Direct Labor $5,000 $ 3,000 26 17.000 12,000 13,000 9,000 The company uses direct labor hours as the activity base to assign overhend. Direct labor hours incurred on cach job were as follows: Job No. 25, 200, Job No. 26, 800, and Job No. 27. 600. Instructions (*) Calculate the predetermined overhead rate for the year 2012, assuming Saeed Manufacturing estimates total manufacturing overhead costs of S4RO,DIXO, direct labor costs of $300,000, and direct labor hours of 20.000 for the Year (b) Openjobost sheets for Jobs 25. 26. and 27. Enter the January 1 balances on the job cost sheet for Job No. 25 (c) Prepare the journal entries to record the purchase of raw materials, the factory Inbor costs incurred, and the manufacturing overhead costs incurred during the month of January (d) Prepare the journal entries to record the assignment of direct materials direct labor, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead mate calculated in (a). Post all costs to the job cost sheets as necessary (e) Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry (or entries to record the completion of any job(s) during the month (1) Prepare the journal entry (or entries) to record the sale of any job(s) during the month (g) What is the balance in the Work in Process Inventory account at the end of the month? What does this balance consist of (h) What is the amount of over or underapplied overhead?

Answer 1

Part A

Predetermined overhead rate = Estimated total manufacturing overhead cost / direct labor hours = 480000/20000 = $24 per DLH

Part B

Job no.: 25
Date	Direct materials	Direct labor	Manufacturing overhead
Beg.	10000	6000	9000
Jan.	5000	3000	4800
	$15000	$9000	$13800
Cost of completed job
Direct materials			15000
Direct labor			9000
Manufacturing overhead			13800
Total cost			$37800

200*24 = 4800

Job no.: 26
Date	Direct materials	Direct labor	Manufacturing overhead
Beg.	-	-	-
Jan.	17000	12000	19200
	$17000	$12000	$19200
Cost of completed job
Direct materials			17000
Direct labor			12000
Manufacturing overhead			19200
Total cost			$48200

800*24 = 19200

Job no.: 27
Date	Direct materials	Direct labor	Manufacturing overhead
Jan.	13000	9000	14400

600*24 = 14400

Part C

No.	Account titles and explanation	Debit	Credit
1	Raw Materials Inventory	40000
	Accounts Payable		40000
2	Factory Labor	31500
	Factory Wages Payable		24000
	Employer Payroll Taxes Payable		7500
3	Manufacturing Overhead	40500
	Accounts Payable		11000
	Accumulated Depreciation—Equipment		12000
	Raw Materials Inventory		10000
	Factory Labor		7500

Part D

No.	Account titles and explanation	Debit	Credit
1	Work in Process Inventory	34000
	Raw Materials Inventory (5000+17000+12000)		34000
2	Work in Process Inventory	24000
	Factory Labor (3000+12000+9000)		24000
3	Work in Process Inventory ((200+800+600)*24)	38400
	Manufacturing Overhead		38400

Part E

Job no.: 25
Date	Direct materials	Direct labor	Manufacturing overhead
Beg.	10000	6000	9000
Jan.	5000	3000	4800
	$15000	$9000	$13800
Cost of completed job
Direct materials			15000
Direct labor			9000
Manufacturing overhead			13800
Total cost			$37800

200*24 = 4800

Job no.: 26
Date	Direct materials	Direct labor	Manufacturing overhead
Beg.	-	-	-
Jan.	17000	12000	19200
	$17000	$12000	$19200
Cost of completed job
Direct materials			17000
Direct labor			12000
Manufacturing overhead			19200
Total cost			$48200

800*24 = 19200

Job no.: 27
Date	Direct materials	Direct labor	Manufacturing overhead
Jan.	13000	9000	14400

600*24 = 14400

Account titles and explanation	Debit	Credit
Finished Goods Inventory	86000
Work in Process Inventory (37800+48200)		86000

Part F

No.	Account titles and explanation	Debit	Credit
1	Cost of Goods Sold (42000+37800)	79800
	Finished Goods Inventory		79800
2	Accounts Receivable (63000+74000)	137000
	Sales		137000

Part G

Finished goods inventory

$111860

Job No. 26

Finished goods inventory = (42000+86000)-79800= $48200

Part H

Manufacturing overhead

$2100

Underapplied

Underapplied overhead = actual – applied = 40500-38400 = 2100