Question

Schmeltz Industries organized in January and recorded the following transactions during its first month of operations. Jan. 5 Jan. 9 Jan. 14 Jan. 18 Jan. 25 Purchased materials on account for $800,000. Used materials costing $450,000 on job no. 1001. Used materials costing $200,000 on job no. 1002. Used materials costing $100,000 on job no. 1003. Applied the following direct labor costs to jobs: job no. 1001, $3,600; job no. 1002, $5,400; job no. 1003, $1,350. (Direct labor workers earn $18 per hour.) Applied manufacturing overhead to all jobs at a rate of $450 per direct labor hour. Completed and transferred job no. 1001 and job no. 1002 to the finished goods warehouse. Sold job no. 1001 on account for $725,000. Recorded and paid actual January manufacturing overhead costs of $248,750, cash. Closed the Manufacturing Overhead account directly to Cost of Goods Sold. Jan. 27 Jan. 28 Jan. 29 Jan. 31 Jan. 31 a. Prepare journal entries for each of these transactions. b. Compute the balance of the Cost of Goods Sold account at January 31. c. Determine the company's inventory balances at January 31. d. Was manufacturing overhead in January overapplied, or was it underapplied? Explain.

Answer 1

Since actual overhead is less than applied overhead it is over applied

No Credit General journal 1 Raw materials Accounts payable Debit 800,000 $ $ 800,000 $ 450,000 2 Work in progress-Job 1001 Raw materials $ 450,000 $ 200.000 3 Work in progress-Job 1002 Raw materials $ 200,000 / $ 100,000 4 Work in progress-Job 1003 Raw materials $ 100,000 $ 5 Work in progress-Job 1001 Work in progress-Job 1002 Work in progress-Job 1003 Direct labour 3,600 5.400 1,350 $ 10,350 6 Work in progress-Job 1001 Work in progress-Job 1002 Work in progress-Job 1003 Manufacturing overhead $ $ $ 90,000 135,000 33,750 | $ 258,750 $ 884.000 7 Finished goods Work in progress-Job 1001 Work in progress-Job 1002 $ $ 543,600 340,400 725,000 8 Accounts receivable Sales $ 725,000 $ 543,600 9 Cost of goods sold Finished goods $ 543,600 $ 248,750 10 Manufacturing overhead Cash $ 248,750 10,000 11 Manufacturing overhead Cost of goods sold $ 10,000 Note-1 Caluclation of under / over applied overhead Actual manufacturing overhead $ 248,750 Applied manufacturing overhead $ 258,750 Over applied S 10,000

A $ Work in progress-Job 1001 Work in progress-Job 1002 Work in progress-Job 1003 Total Total Direct labour cost 3,600 $ 5,400 $ 1,350 $ Labour cost per hour 18 $ 18 $ 18 $ No of direct labour hours 200 Hours 300 Hours 75 Hours 575 Hours Manufacturing overhead applied per hour | $ 450 $ 450 $ 450 $ Total Manufacturing overhead applied $ 90,000 $ 135,000 $ 33,750 $ 10,350 A 18 B C=A/B 450 D 258,750 E=C*D

Raw Materials Particulars Purchases Less Direct Material consumed Closing balance Amount $ 800,000 $ 750,000 $ 50,000 Work in progress Particulars Job 1001 Job 1002 Job 1003 Total Add Direct Material consumed $ 450,000 S 200,000 $ 100,000 $ 750,000 Add Direct labour 3,600 $ 5,400 $ 1,350 $ 10,350 Add Overhead applied 90,000 $ 135,000 $ 33,750 $ 258,750 Cost of goods manufactured 543,600 $ 340,400 $ 135,100 $1,019,100 Less Trasferred to finished goods $ (543,600) $ (340,400) $ - $ (884,000) Status on April 30 Finished (Sold) Finished (Unsold) | In process Closing balance in work in progress S - S - S 135,100 $ 135,100 Finished goods Particulars Opening Add Trasferred to finished goods Less Cost of goods sold (Job-1001) Amount $ $ 884 884,000 $ (543,600) Closing Bal $ 340,400 $ Cost of goods sold Trasferred to finished goods Less: Goods sold Less: Over Applied Balance in cost of goods sold 884,000 (543,600) (10,000 330.400 $ s