Question

P15.1A (LO 1, 2, 3, 4,5), AP Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2022, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $20.000, direct labor $12,000, and manufacturing overhead $16,000. As of January 1, Job 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. Prepare entries in a job order cost system and job cost sheets. During the month of January, Lott 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 $12,000, and various other manufacturing overhead costs on account $16.000. 4. Assigned direct materials and direct labor to jobs as follows. Job Direct Direct No. Materials Labor

Answer 1

In this question, first of all we have to Calculate predetermined overhead.

Requirement a. Calculate predetermined overhead rate for 2022.

Solution: Predetermined overhead rate for 2022 = Total manufacturing overhead cost / Direct labor costs

= $840,000 / $700,000

= 1.2 per dollar of direct labor

Requirement b. Open job sheets for Jobs 50, 51 and 52. Enter the January 1 balances on the job cost sheet for Job 50.

Solution: Job Cost Sheets for Job 50

Date	Direct Material	Direct Labor	Manufacturing overhead
Jan	$ 20,000	$ 12,000	$ 16,000
	$ 10,000	$ 5,000	$ 6,000 (1.2 * $ 5,000)
	$ 30,000	$ 17,000	$ 22,000

Total Cost = Direct material + Direct Labor + Manufacturing Overhead

= $30,000+ $17,000 + $22,000

Total Cost for Job 50 = $69,000

Job Cost Sheet for Job 51

Date	Direct Material	Direct Labor	Manufacturing overhead
Jan	$ 39,000	$ 25,000	$ 30,000 (1.2 * 25,000)
	$ 39,000	$ 25,000	$ 30,000

Total Cost = Direct material + Direct Labor + Manufacturing Overhead

= $39,000 +$25,000 + $30,000

Total Cost for Job 51 = $94,000

   Job Cost Sheet for Job 52

Date	Direct Material	Direct Labor	Manufacturing overhead
Jan	$ 30,000	$ 20,000	$ 24,000 (1.2 * 20,000)
	$ 30,000	$ 20,000	$ 24,000

Total Cost = Direct material + Direct Labor + Manufacturing Overhead

= $30,000 + $20,000 + $24,000

Total Cost for Job 52 = $74,000

Requirement c. Prepare the journal entries to record the purchase of raw materials, the factory labor cost incurred, and the manufacturing overhead costs incurred during the month of January.

Solution: Journal entries

Raw materials A/c Debit	$ 90,000
Account Payable A/c Credit		$ 90,000
(Record purchase of raw materials)
Factory Labor A/c Debit	$ 70,000
Factory Wages Payable A/c Credit		$ 54,000
Employer payroll Taxes payable A/c Credit		$ 16,000
(Record factory labor cost incurred)
Manufacturing Overhead	$ 65,000
Raw Materials		$ 17,000
Factory Labor		$ 20,000
Accumulated Depreciation		$ 12,000
Account Payable		$ 16,000

Requirement d. Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production.

Solution: Journal Entries

Work in Process A/c Debit	$ 79,000
Raw Materials A/c Credit		$ 79,000
(Record the assignment of direct materials)
Work in Process A/c Debit	$ 50,000
Direct Labor A/c Credit		$ 50,000
(Record the assignment of Direct labor)
Work in Process A/c Debit (1.2 * $50,000)	$ 60,000
Manufacturing Overhead A/c Credit		$ 60,000

Required 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.

Solution : Journal Entry

Finished goods A/c Debit	$ 163,000
Work in Process A/c Credit		$ 163,000
(Job 50 + Job 51) ($69,000 + $94,000)

Required f. Prepare the journal entry (or entries) to record the sale of any jobs during the month.

Solution:- Journal entries

Account Receivable A/c Debit	$ 280,000
Sale Revenue A/c Credit		$ 280,000

Working Note:-

Job 49 - $122,000 (Given in the question)

Job 50 - $158,000 (Given in the question)

= $122,000 + $158,000 = $260,000

Required g. What is the balance in Finished Goods Inventory account at the end of the month? What does this balance Consists of?

Solution: Finished Goods Inventory Account

Beginning balance	$ 90,000	Cost of Jobs 49 and 50 sold ($90,000 + $69,000)	$ 159,000
Cost of Completed jobs 50 and 51 ($69,000 + $94,000)	$ 163,000
Ending Balance	$ 94,000

The balance in the account consists of the cost of completed Job no. 51 which has not yet been sold.

Requirement h. What is the amount of over or under applied overhead?)

Solution: - Applied - Actual = $60,000 - $65,000 = - $5,000 (Under applied)

The balance in the manufacturing overhead account is Under applied.

Thank you..

Have a Nice day..