Question

| ACC 212 Challenge #2 7) At the end of the period, in which account is the product cost for the following: | ob 136 Job 137 Job 138 | | | | 8) Compute the balance of the Work in Process and Factory Overhead accounts: Work in Process Factory Overhead | | | | | 9) Prepare the journal entry to close the Factory Overhead account: Debit Credit Account Titles and Explanation | | | 10) Was the factory overhead overapplied or underapplied? 11) What was the amount that factory overhead was overapplied or underapplied? 12) What effect will closing factory overhead (#8) have on total gross profit? 13) Which internal document can you use to verify the ending balance in the WIP account is correct?

Answer 1

1)Predetermined overhead rate =Estimated factory overhead cost /Estimated direct labor cost

                               = 1305000 / 870000

                               = 1.50 or 150%of direct labor cost

2)

DATE	ACCOUNT TITLE	DEBIT	CREDIT
a	Raw material inventory	872500
	Accounts payable		872500
	[Being inventory purchased on account]
b	Work in process inventory	494575
	Factory overhead	24300
	Raw material inventory		518875
	[Being material requisitioned to jobs and indirect material used is appropriately debited to factory overhead . ]
c	Work in process inventory	70750
	Factory overhead	56000
	Factory labor		126750
	[Being Labor cost applied to Jobs and indirect labor cost is appropriately debited to factory overhead . ]
d	Factory overhead	25375
	Accumulated depreciation-Factory building		5500
	Prepaid insurance		7875
	property taxes payable		5750
	Cash		6250
	[Being other factory overhead cost incurred]
e	Work in process inventory	106125
	Factory overhead (70750*150%]		106125

3)

Job	136	137	138
Direct material	230075	90200	174300
Direct labor	18250	22500	30000
overhead applied	18250*150%= 27375	22500*150%=33750	30000*150%=45000
Total cost	275700	146450	249300

4)

DATE	ACCOUNT TITLE	DEBIT	CREDIT
	Finished goods inventory	525000
	Work in process inventory		525000
	[Being completed jobs transferred to finished goods inventory ;275700+249300]

5)

DATE	ACCOUNT TITLE	DEBIT	CREDIT
	Accounts receivable	395000
	Sales revenue		395000
	[Being sales made on account]
	cost of goods sold	275700
	Finished goods inventory		275700
	[Being cost of goods sold recorded]

6)Gross profit =sales -cost

                = 395000 -275700

               = 119300