Question

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead costs to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,335,000 in manufacturing overhead cost at an activity level of 578,000 machine-hours.

The company spent the entire month of January working on a large order for 8,100 custom made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:

  

a.	Raw materials purchased on account, $321,000.
b.	Raw materials requisitioned for production, $266,000 (80% direct and 20% indirect).
c.	Labor cost incurred in the factory, $177,000, of which $59,000 was direct labor and $118,000 was indirect labor.
d.	Depreciation recorded on factory equipment, $63,700.
e.	Other manufacturing overhead costs incurred, $85,000 (credit Accounts Payable).
f.	Manufacturing overhead cost was applied to production on the basis of 40,620 machine-hours actually worked during the month.
g.	The completed job was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)

  

Required:
1.	Prepare journal entries to record items (a) through (f) above. [Ignore item (g) for the moment.] (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

         

2.	Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts. (Do not round intermediate calculations.)

    

3.	Prepare a journal entry for item (g) above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

         

4.	Compute the unit product cost that will appear on the job cost sheet. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

      

Answer 1

1) Journal entry

No	General Journal	Debit	Credit
a	Raw material	321000
	Account payable		321000
b	Work in process (266000*80%)	212800
	Manufacturing overhead	53200
	Raw material		266000
c	Work in process	59000
	Manufacturing overhead	118000
	wages payable		177000
d	Manufacturing overhead	63700
	Accumulated depreciation-equipment		63700
e	Manufacturing overhead	85000
	Account payable		85000
e	Work in process (40620*7.5)	304650
	Manufacturing overhead		304650

b) T account

Manufacturing overhead					Work in process
Raw material	53200	Work in process	304650		Beg Bal	0	Finished goods	576450
wages payable	118000				Raw material	212800
Accumulated depreciation	63700				wages payable	59000
Account payable	85000				Manufacturing overhead	304650
Balance	15250				Balance	0

c) Journal entry

No	account and explanation	Debit	Credit
g	Finished goods	576450
	work in process		576450

d) Unit product cost = 576450/8100 = 71.17