Question

PROBLEM M2 Objective che problem set is designed to enhance your understanding of job-order costing and accounting transactions associated with the process of manufacturing a product. Background De building was ready for production on January 15. In January an order was received from Hot Pots Ime sational retailer of kitchen equipment and another was received from Delta Retail, a bie box store. Ianuar production also included a job to build inventory of 15-inch skillets. Economic Activity On January 17h Pat began production on his first job. Throughout January, jobs were scheduled as follows: Job # 1 12 3 Date Started 1/17/2020 11/19/2020 1/25/2020 Description 4,000 10-inch skillets for Hot Pots, a national retailer 2.000 15-inch skillets produced for inventory (stock) 1.000 20-inch griddles for Delta Retail, a big box store Pat has decided to allocate manufacturing overhead on the basis of direct labor hours (DLH). Estimated manufacturing overhead costs totaled $2,924,000 for the year and 34.000 DLH were estimated for the same time period. The twenty individuals that will work in the plant will all be paid the same rate: $34.00 per hour. The current model of pans requires only two direct materials: pig iron and scrap steel. All other materials are considered indirect and part of manufacturing overhead. Figure 2 shows the direct materials used in production. Figure 2: Pan Materials As Pat's accountant, you note the pans will be manufactured in individual and identifiable jobs so you set up a job- order costing system to record and process the costs of production. The costs of each job will be recorded in a separate job cost record that will serve as a subsidiary ledger for the general journal entries that will be made to record the business' transactions. Information specific to the three jobs is presented below. The information in the tables should be entered into the job cost record for each job and a journal entry using the summary information (marked with a check) should be recorded in the general journal provided in PACKET 2.

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Answer 1

Part A:

Predetermined overhead rate = Estimated Manufacturing Overhead Costs / Estimated DLH = $ 2,924,000 / 34,000 DLH = $ 86 per DLH.

Job Cost Record: Job # 1 :

Job Cost Record
Job No. 1
Customer: Hot Pots Inc.
Job Description: 4,000 10-inch skillets
Date Started: 1/17/20	Date Completed: 1/25/20
Manufacturing Cost Information	Cost Summary
Direct Materials
Pig Iron ( 16,500 lbs. @ $ 0.25 per lb. )	$ 4,125
Scrap Steel ( 4,130 lbs.@ $ 0.10 per lb. )	413
	4,538
Direct Labor
870 DLH @ $ 34 per hour	29,580
Manufacturing Overhead
870 DLH @ $ 86 per DLH	74,820
Total Job Cost	$ 108,938
Number of Units	4,000
Cost per Unit	$ 27.23

Job Cost Record : Job # 2

Job Cost Record
Job No. : 2
Customer: Inventory
Job Description : 2,000 15-inch skillets
Date Started: 1/19/20	Date Completed :1/27/20
Manufacturing Cost Information	Cost Summary
Direct Materials
Pig Iron ( 20,700 lbs. @ $ 0.25 per lb . )	$ 5,175
Scrap Steel ( 5,100 lbs. @ $ 0.10 per lb. )	510
	$ 5,685
Direct Labor
460 DLH @ $ 34	15,640
Manufacturing Overhead
460 DLH @ $ 86	39,560
Total Job Cost	$ 60,885
Number of Units	2,000
Cost per Unit	$ 30.44

Job Cost Record: Job # 3

Job Cost Record
Job No. : 3
Customer : Delta Retail
Job Description: 1,000 20 -inch griddles
Date started: 1/25/20	Date completed : N/A
Manufacturing Cost Information	Cost Summary
Direct Materials
Pig Iron 12,700 lbs. @ $ 0.25 per lb.	$ 3,175
Scrap Steel 3,250 lbs. @ $ 0.10 per lb.	325
	3,500
Direct Labor
145 DLH @ $ 34	$ 4,930
Manufacturing Overhead
145 DLH @ $ 86	12,470
Total Job Cost	$ 20,900
Number of Units	1,000
Cost per Unit	N/A

Part B :

Date	Description	Debit	Credit
2020		$	$
1/17	Work in Process Inventory	4,538
	Raw Materials Inventory		4,538
1/19	Work in Process Inventory	5,685
	Raw Materials Inventory		5,685
1/25	Work in Process Inventory	3,500
	Raw Materials Inventory		3,500
1/25	Work in Process Inventory	74,820
	Manufacturing Overhead		74,820
1/27	Work in Process Inventory	39,560
	Manufacturing Overhead		39,560
1/28	Work in Process Inventory	50,150
	Factory Wages Payable		50,150
1/28	Work in Process Inventory	12,470
	Manufacturing Overhead		12,470

Part C :  

Date	Description	Debit	Credit
		$	$
1/15	Raw Materials Inventory	36,000
	Accounts Payable		36,000
1/17	Manufacturing Overhead	900
	Raw Materials Inventory		900
1/25	Finished Goods Inventory	108,938
	Work in Process Inventory		108,938
1/26	Advertising Expense	11,000
	Cash		11,000
1/27	Accounts Receivable	136,000
	Sales Revenue		136,000
1/27	Cost of Goods Sold	108,938
	Finished Goods Inventory		108,938
1/27	Finished Goods Inventory	60,885
	Work in Process Inventory		60,885
1/28	Manufacturing Overhead	8,000
	Factory Wages Payable		8,000
1/28	Manufacturing Overhead	35,000
	Accounts Payable		35,000
1/28	Manufacturing Overhead	1,200
	Salaries Expense	7,400
	Sales Commissions Expense	1,360
	Cash		9,960
1/28	Manufacturing Overhead	82,000
	Accumulated Depreciation: Plant Building and Equipment		82,000
1/28	Rent Expense	2,200
	Cash		2,200

Part D & E :

Raw Materials Inventory
Beg. bal.	0	1/17	5,438
1/15	36,000	1/19	5,685
		1/25	3,500
End. bal.	21,377
Work in Process Inventory
Beg. bal.	0
1/17	4,538
1/19	5,685	1/25	108,938
1/25	3,500	1/27	60,885
1/25	74,820
1/27	39,560
1/28	50,150
1/28	12,470
End. bal.	20,900
Finished Goods Inventory
Beg. bal.	0	1/27	108,938
1/25	108,938
1/27	60,885
End. bal.	60,885
Manufacturing Overhead
Beg. bal.	0	1/25	74,820
1/17	900	1/27	39,560
1/28	8,000	1/28	12,470
1/28	35,000
1/28	1,200
1/28	82,000
		Cost of Goods Sold	250
End. bal.	0
Cost of Goods Sold
Bg. bal.	0
1/27	108,938
Manufacturing Overhead	250
Bal.	109,188

Part F :

Perfect Pans Income Statement For the month ended.....
Sales		$136,000
Cost of Goods Sold		109,188
Gross Profit		26,812
Selling and Administrative Expenses
Advertising Expense	11,000
Sales Commissions Expense	1,360
Sales Salaries Expense	2,600
Administrative Salaries Expense	4,800
Rent Expense	2,200
Total Selling and Administrative Expenses		21,960
Net Operating Income		$ 4,852