Question

Please answer the following question. JOB ORDER COSTING The company "Homes for Us" manufactures houses. The company is labor intensive and allocates overhead based on labor hours. "Homes for Us" expects to incur S400,000 of manufacturing overhead costs and to use 8.000 labor hours during 2018. "Homes for Us" had no beginning inventory. It recorded the following transactions during January Purchased direct materials (on account) for $85,000 Purchased indirect materials (on account) for $12,000 Incurred other manufacturing overhead cost on account) for $15.000 Used direct materials - S60,000 Incurred direct labor costs-550.000 Used $4,000 of the indirect materials that was purchased in #2) Allocated manufacturing overhead for January The company actually used 400 machine hours in January Requirements: 1] Calculate the Pre-determined Manufacturing Overhead Rate. 2] Record the Journal Entries for the purchase of materials & overhead (items 1, 2 & 3) 3] Record the Journal Entries for use of direct materials and labor (items 14 & #5) 4] Record the Journal Entry for allocation of overhead 5] Record the journal entry to close the allocated balance of the overhead account

Answer 1

40 1) Predetermined manufacturing overhead rate Estimated manufacturing overhead costs Estimated direct labor hours 41 42 43 400000 44 8000 45 Predetermined manufacturing overhead rate 50.00 per direct labor hour 46 47 48 2) Account title & explanation Debit Credit 1 Direct Material 85,000 49 Accounts Payable 50 85,000 (To record purchase of Direct Material on account) 51 52 2 Indirect Material 53 12,000 Accounts Payable 54 12,000 (To record purchase of Indirect Material on account) 55 56 3 Manufacturing Overhead Accounts Payable (To record manufacturing overhead) 57 15,000 58 15,000 59 60 4 Work In Process Inventory 61 60,000 Direct Material 62 60,000 (To record direct material used) 63

5 Work In Process Inventory Wages Payable (To record direct labor used) 65 50,000 50,000 66 67 68 6 Manufacturing Overhead 69 4,000 Indirect Material 70 4,000 (To record indirect material used) 71 72 7 Work In Process Inventory (400*50) Manufacturing Overhead (To record overheads allocated) 73 20,000 74 20,000 75 76 8 Manufacturing Overhead Cost of Goods Sold Allocated Overheads (400*50.00) 77 1,000 20,000 78 1,000 Less Actual manufacturing Overhead Cost 19,000 Overerapplied Overhead Cost (To close overapplied Overheads) 79 1,000 80 81