Question

Southwick Company uses normal costing in its job-costing system. Partialy completed T-accounts and additional information for Southwick for 2017 are as follows. 

Requirement 1. What was the amount of direct materials issued to production during 2017?

Direct materials issued to production during 2017 was _______ 

1. What was the amount of direct materials issued to production during 2017 ?

2. What was the amount of manufacturing overhead allocated to jobs during 2017 ?

3. What was the total cost of jobs completed during 2017 ?

4. What was the balance of work-in-process inventory on December 31,2017 ?

5. What was the cost of goods sold before proration of under-or overallocated overhead?

6. What was the under-or overallocated manufacturing overhead in 2017 ?

7. Dispose of the under-or overallocated manufacturing overhead using the following:

a. Write-off to Cost of Goods Sold

b. Proration based on ending balances (before proration) in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold

8. Using each of the approaches in requirement 7, calculate Southwick's operating income for 2017 .

9. Which approach in requirement 7 do you recommend Southwick use? Explain your answer briefly.

a. Direct manufacturing labor wage rate was $ 10 per hour.

b. Manufacturing overhead was allocated at $ 13 per direct manufacturing labor-hour.

c. During the year, sales revenues were $ 1,040,000, and marketing and distribution costs were $ 120,000 .

Answer 1

Solution:

1) Direct material issued to production = Beginning materials + Purchases - Ending materials

= $39000 + $138000 - $53000 =$124000

2) Manufacturing overhead allocated = No. of labor hours x Manufacturing overhead rate

= (Direct labor cost / Direct labor rate) x Manufacturing Overhead rate

= ($350000 / $10) x $13 = $455000

3) Total cost of jobs completed would be determined on the basis of finished goods controls account, where the debit side of such account represents total cost of job completed. Therefore, Total cost of job completed is $923380.

4) Balance of Work in Process Inventory:

Work-In-Process Control Account

	$		$
Beginning Balance	40000	Transferred to finished goods	923380
Direct materials	124000	Ending balance	45620
Direct Labor	350000
Manufacturing overheads	455000
	969000		969000