Question

P2-1A Degelman Company uses a job order cost system and applies overhead to produc- tion on the basis of direct labor costs. On January 1, 2014, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials Prepare entries in a job order cost system and job cost sheets. (LO 2, 3, 4, 5, 6), AP 2 Job Order Costing $20,000, direct labor $12,000, and manufacturing overhead $16,000. As of January 1, Job No. 49 had been completed at a cost of $90,000 and was part of finished goods inventory. There was a $15,000 balance in the Raw Materials Inventory account. During the month of January, Degelman Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $122,000 and $158,000, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $90,000 on account. 2. Incurred factory labor costs of $70,000. Of this amount $16,000 related to employer payroll taxes. 3. Incurred manufacturing overhead costs as follows: indirect materials $17,000; indirect labor $20,000; depreciation expense on equipment $19,000; and various other manu- facturing overhead costs on account $16,000. 4. Assigned direct materials and direct labor to jobs as follows. Job No. Direct Materials $10,000 39,000 30,000 Direct Labor $ 5,000 25,000 20,000 Instructions (a) Calculate the predetermined overhead rate for 2014, assuming Degelman Company estimates total manufacturing overhead costs of $980,000, direct labor costs of $ 700,000, and direct labor hours of 20,000 for the year. (b) Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet for Job No. 50. (c) Prepare the journal entries to record the purchase of raw materials, the factory labor 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 over- head costs, use the overhead rate 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 jour- nal entry (or entries) to record the completion of any job(s) during the month. (f) Prepare the journal entry (or entries) to record the sale of any job(s) during the month. (g) What is the balance in the Finished Goods Inventory account at the end of the month? What does this balance consist of? (h) What is the amount of over- or underapplied overhead? ob 50, $70,000 ob 51, $99,000

Answer 1

a)	predetermined overhead rate
	Estimated manufacturing overhead/total estimated direct labor costs
	980000/700000
	140.00%
b)	job no 50
	Date		Direct	direct	MOH
			materials	labor
	beg.		20,000	12,000	16,000
	Jan		10,000	5,000	7,000
			30,000	17,000	23,000
	cost of completed job
	Direct materials				30,000
	direct labor				17,000
	MOH				23,000
	total cost				70,000
	job no 51
	Date		Direct	direct	MOH
			materials	labor
	Jan		39,000	25,000	35,000
			39,000	25,000	35,000
	cost of completed job
	Direct materials				39,000
	direct labor				25,000
	MOH				35000
	total cost				99,000
	Job 52
	Date		Direct	direct	MOH
			materials	labor
	Jan		30,000	20,000	28,000
c)	No	Account titles & Explanations				Debit	Credit
	1)	Raw materials inventory				90,000
		Accounts payable					90,000
	2)	Factory labor				70,000
		Factory wages payable					54,000
		employer payroll taxes payable					16,000
	3)	manufacturing overhead				72,000
		raw materials inventory					17,000
		Factory labor					20,000
		Accumulated depreciation					19,000
		Accounts payable					16,000
d)	No	Account titles & Explanations				Debit	Credit
	1)	Work in process inventory				79,000
		Raw materials inventory					79,000
	2)	work in process inventory				50,000
		Factory labor					53,000
	3)	Work in process inventory				60000
		manufacturing overhead					60,000
e)		Account titles & Explanations				Debit	Credit
		finished goods inventory				169,000
		work in process inventory					169,000
		(job 50 +job 51 =
f)	No	Account titles & Explanations				Debit	Credit
		Accounts receivable				280000
		sales					280,000
		cost of goods sold
		finished goods inventory				160,000
		(job 49+job 50)					160,000
g)	finished goods inventory			99,000	Job No 51
				finished goods inventory
		opening		90,000	COGS		160,000
		WIP		169,000
		end bal		99,000
h)
	manufacturing overhead			12,000	under applied
			manufacturing overhead
		Actual		72,000	Applied		60,000
		bal		12,000