Question

Waterways has two major public park projects to provide with comprehensive irrigation in one of its service locations this month. Job J57 and Job K52 involve 15 acres of landscaped terrain, which will require special- order, sprinkler heads to meet the specifications of the project. Using a job cost system to produce these parts, the following events occurred during December. Raw materials were requisitioned from the company's inventory on December 2 for $5,031; on December 8 for $1,065; and on December 14 for $3,459. In each instance, two-thirds (2/3) of these materials were for J57 and the rest for K52. Six time tickets were turned in for these two projects for a total amount of 18 hours of work. All the workers were paid $18 per hour. The time tickets were dated December 3, December 9, and December 15. On each of those days, 6 labor hours were spent on these jobs, two-thirds (2/3) for J57 and the rest for K52. The predetermined overhead rate is based on machine hours. The expected machine hour use for the year is 2.101 hours, and the anticipated overhead costs are $840,400 for the year. The machines were used by workers on projects K52 and J57 on December 3, 9, and 15. Six machine hours were used for project K52 (2 each day), and 8.5 machine hours were used for project J57 (2.5 the first day and 3 each of the other days). Both of these special orders were completed on December 15, producing 200 sprinkler heads for J57 and 100 sprinkler heads for K52. Additional job order activities during this period included: Dec. 1 Purchased raw materials from Durbin Supply Company on account for $53,600. Dec. 2 Issued $39.800 of direct materials from the company's inventory to jobs other than K52 and J57 and $3,000 of indirect materials. Dec. 12 Paid Waterways' factory salaries and wages for $64,800. Dec. 13 Paid the factory's water bill of $9,000. Dec. 18 Transferred $50,100 of costs from other completed jobs to finished goods. Dec. 21 Paid the factory's electric bill of $12,100 for Waterways' factory. Dec. 31 Made adjusting entries forth factory that included accrued property taxes of $11,900, prepaid insurance of $8,800, and accumulated depreciation of $16,000. Set up the job cost sheets for Job No. 357 and Job No. 652. Determine the total cost for each manufacturing special order for these jobs. (Round unit costs to 2 decimal places, e.g. 12.25.) Job No.257 Job No. K52 Total Cost $ Unit Cost $

Answer 1

(a)

	Job No. J57	Job No. K52
Total Cost	$        9,986	$         5,693
Unit Cost	$        49.93	$         56.93

Working:

Predetermined overhead rate = $840400/2101 hours = $400 per machine hour

Date	Description	Job J57	Job K52
12/2	Direct materials	3354	1677
12/3	Direct labor	72	36
12/3	OH	1000	800
12/8	Direct materials	710	355
12/9	Direct labor	72	36
12/9	OH	1200	800
12/14	Direct materials	2306	1153
12/15	Direct labor	72	36
12/15	OH	1200	800
	Total cost $	9986	5693
	Number of units	200	100
	Unit cost $	49.93	56.93

(b)

Date	Account Titles and Explanations	Debit	Credit
12/1	Raw Materials Inventory	53600
	Accounts Payable		53600
	(Purchase of raw materials on account)
12/2	Work in Process Inventory	5031
	Raw Materials Inventory		5031
	(To assign materials to jobs J57 & K52)
12/2	Work in Process Inventory	39800
	Manufacturing Overhead (indirect materials)	3000
	Raw Materials Inventory		42800
	(To assign materials and overheads to other jobs)
12/3	Work in Process Inventory	108
	Factory Labor (6 hours x $18)		108
	(To assign labor to jobs J57 & K52)
12/3	Work in Process Inventory	1800
	Manufacturing Overhead [(2.5 + 2) x $400]		1800
	(To assign overheads to jobs J57 & K52)
12/8	Work in Process Inventory	1065
	Raw Materials Inventory		1065
	(To assign materials to jobs J57 & K52)
12/9	Work in Process Inventory	108
	Factory Labor		108
	(To assign labor to jobs J57 & K52)
12/9	Work in Process Inventory	2000
	Manufacturing Overhead [(3 + 2) x $400]		2000
	(To assign overheads to jobs J57 & K52)
12/12	Factory Labor	64800
	Cash		64800
	(To record factory labor costs and payment)
12/13	Manufacturing Overhead	9000
	Cash		9000
	(To record payment of factory water bill)
12/14	Work in Process Inventory	3459
	Raw Materials Inventory		3459
	(To assign materials to jobs J57 & K52)
12/15	Work in Process Inventory	108
	Factory Labor		108
	(To assign labor to jobs J57 & K52)
12/15	Work in Process Inventory	2000
	Manufacturing Overhead [(3 + 2) x $400]		2000
	(To assign overheads to jobs J57 & K52)
12/15	Finished Goods Inventory ($9986 + $5693)	15679
	Work in Process Inventory		15679
	(To record completion of jobs K57 & K52)
12/18	Finished Goods Inventory	50100
	Work in Process Inventory		50100
	(To record completion of other jobs)
12/21	Manufacturing Overhead	12100
	Cash		12100
	(To record payment of factory electric bill)
12/31	Manufacturing Overhead	36700
	Property Taxes Payable		11900
	Prepaid Insurance		8800
	Accumulated Depreciation		16000
	(To record overhead costs)

(c) A debit balance in the manufacturing overhead indicates that overhead has been under applied by $3600.

Date	Account Titles and Explanations	Debit	Credit
12/31	Cost of goods sold	3600
	Manufacturing Overhead		3600
	(To record adjusting entry for under applied overhead)

(d) Waterways would choose machine hours as the cost driver for the production of the sprinkler heads if it is a machine intensive process rather than a labor intensive one. The cost driver for the installation of the irrigation system could be direct labor cost or the direct labor hours.