Question

Problem for Job Order Costing

Tiny Homes uses a job costing system to account for the individual prefabricated homes of January 1, its accounting records showed inventories as follows the individual prefabricated homes it builds. As Materials and supplies Work in process (Jobs 422 and 423) Finished goods (Job 421) $120,000 180,000 175,000 The work in process in ventory consisted of two jobs: Job# 422 423 Direct Materials $36,000 Direct Labor Manufacturing Overh $40,000 $20,000 $96,000 $36,000 $180,000 $76,000 $68,000 Other data: 1. Materials purchased on account, $400,000. 2. Direct materials used: Job 422, $60,000; Job 423, S120,000: Job 424, S180,000. Indirect materials used, $10,000. 3. Direct labor costs: Job 422, $100,000; Job 423, S200,000; Job 424, s80,000. Indirect labor costs, $80,000. 4. Overhead assigned to jobs at $200 per machine hour. Job 422 used 250 machine hours, Job 423 used 500 machine hours, and Job 424 used 150 machine hours. 5. Jobs 422 and 423 were completed and transferred to Finished Goods Inventory 6. Jobs 421 and 422 were sold on account for $1,350,000 total. 7. Manufacturing overhead costs incurred, other than indirect materials and indirect labor, were depreciation, $75,000, and electricity and other miscellaneous, $45,000. 8. Selling, general, and administrative expenses totaled S 195,000. REQUIRED a. Compute the ending balances of Materials, Work in Process, and Finished Goods at the end of January Materials Work in Process Finished Goods 160, ooo 1,31 b. Compute the product costs associated with Jobs 422, 423, and 424 at the end of January? 422 423 424 c. Complete the income statement for the month of January Sales -Cost of goods sold (adjusted) Gross profit margin Selling, general and administrative expenses Net Income

Answer 1

Solution:

Primary Working:
	Job 422	Job 423	Job 424	Total
Beginning WIP	$96,000	$84,000	$0	$180,000
Direct Materials used	$60,000	$120,000	$180,000	$360,000
Direct labor costs	$100,000	$200,000	$80,000	$380,000
Manufacturing Overheads (Machine Hours used * $/MH)	$50,000 (250 MH*200)	$100,000 (500 MH*200)	$30,000 (150 MH*200)	$180,000
Total Manufacturing Costs	$306,000	$504,000	$290,000	$1,100,000
Status of Job	Completed	Completed	Ending WIP

Part a) Calculation of Ending Balances

Materials:
Beginning balance	$120,000
Plus: Materials purchased during the period	$400,000
Total materials available for usage	$520,000
Less: Direct materials used during the period (refer primary working)	-$360,000
Ending Balance of Direct Materials	$160,000
Work in Process:
Ending Work in Process (only Job 424) (refer primary working)	$290,000
Finished Goods :
Beginning Finished Goods (Job 421)	$175,000
Plus: Cost of Job Completed during period
Job 422	$306,000
Job 423	$504,000
Total Finished Goods Available for sale	$985,000
Less: Cost of Jobs Sold (Job 421 $175,000 + Job 422 $306,000)	-$481,000
Ending Finished Goods	$504,000

Part b – Product Cost

	Job 422	Job 423	Job 424	Total
Beginning WIP	$96,000	$84,000	$0	$180,000
Direct Materials used	$60,000	$120,000	$180,000	$360,000
Direct labor costs	$100,000	$200,000	$80,000	$380,000
Manufacturing Overheads (Machine Hours used * $/MH)	$50,000	$100,000	$30,000	$180,000
Product Costs	$306,000	$504,000	$290,000	$1,100,000

Part c – Income Statement

	$$
Sales	$1,350,000
Cost of Goods Sold Adjusted (Refer Note 1)	$511,000
Gross Profit Margin	$839,000
Selling, General and Administrative Expense	$195,000
Net Income	$644,000

Note 1 – Adjusted Cost of Goods Sold

	$$
Cost of Goods Sold (Job 421 & Job 422)	$481,000
Plus: Under Applied Manufacturing Overhead (refer working below)	$30,000
Adjusted Cost of Goods Sold	$511,000

Calculation of Under Applied Manufacturing Overhead

	$$
Indirect Materials	$10,000
Indirect Labor	$80,000
Depreciation	$75,000
Electricity and other misc	$45,000
Manufacturing Overhead Incurred	$210,000
Manufacturing Overhead Applied	$180,000
Under Applied Manufacturing Overhead (210,000 - 180,000)	$30,000

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