Question

Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2020, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $22,600, direct labor $13,560, and manufacturing overhead $18,080. As of January 1, Job 49 had been completed at a cost of $101,700 and was part of finished goods inventory. There was a $16,950 balance in the Raw Materials Inventory account.

During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $137,860 and $178,540, respectively. The following additional events occurred during the month.

1.		Purchased additional raw materials of $101,700 on account.
2.		Incurred factory labor costs of $79,100. Of this amount $18,080 related to employer payroll taxes.
3.		Incurred manufacturing overhead costs as follows: indirect materials $19,210; indirect labor $22,600; depreciation expense on equipment $13,560; and various other manufacturing overhead costs on account $18,080.
4.		Assigned direct materials and direct labor to jobs as follows.

Job No.		Direct Materials		Direct Labor
50		$11,300		$5,650
51		44,070		28,250
52		33,900		22,600

1. Calculate the predetermined overhead rate for 2020, assuming Lott Company estimates total manufacturing overhead costs of $949,200, direct labor costs of $791,000, and direct labor hours of 22,600 for the year.
2. Prepare the journal entries to record (1) the purchase of raw materials, (2) the factory labor costs incurred, and (3) the manufacturing overhead costs incurred during the month of January.
3. Prepare the journal entries to record the assignment of (1) direct materials, (2) direct labor, and (3) manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculat
4. Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet for Job 50. Post all costs to the job cost sheets as necessary.
   

Job No. 50
Date		Direct Materials		Direct Labor		Manufacturing Overhead
Beg.		$		$		$
Jan.
		$		$		$
Cost of completed job
Direct materials						$
Direct labor
Manufacturing overhead
Total cost						$

Job No. 51
Date		Direct Materials		Direct Labor		Manufacturing Overhead
Jan.		$		$		$
		$		$		$
Cost of completed job
Direct materials						$
Direct labor
Manufacturing overhead
Total cost						$

Job No. 52
Date		Direct Materials		Direct Labor		Manufacturing Overhead
Jan.		$		$		$

7. Prepare the journal entry to record the completion of any job(s) during the month.
8. Prepare the journal entries to record the sale of any job(s) during the month.
1. What is the balance in the Finished Goods Inventory account at the end of the month? What does this balance consist of?
10. What is the amount of over- or underapplied overhead?

Answer 1

predetermined overhead rate
Estimated manufacturing overhead/total estimated direct labor costs
949200/791000
120.00%
job no 50
Date		Direct	direct	MOH
		materials	labor
beg.		22,600	13,560	18,080
Jan		11,300	5,650	6,780
		33,900	19,210	24,860
cost of completed job
Direct materials				33,900
direct labor				19,210
MOH				24,860
total cost				77,970
job no 51
Date		Direct	direct	MOH
		materials	labor
Jan		44,070	28,250	33,900
		44,070	28,250	33,900
cost of completed job
Direct materials				44,070
direct labor				28,250
MOH				33900
total cost				106,220
Job 52
Date		Direct	direct	MOH
		materials	labor
Jan		33,900	22,600	27,120
No	Account titles & Explanations				Debit	Credit
1)	Raw materials inventory				101,700
	Accounts payable					101,700
2)	Factory labor				79,100
	Factory wages payable					61,020
	employer payroll taxes payable					18,080
3)	manufacturing overhead				73,450
	raw materials inventory					19,210
	Factory labor					22,600
	Accumulated depreciation					13,560
	Accounts payable					18,080
No	Account titles & Explanations				Debit	Credit
1)	Work in process inventory				89,270
	Raw materials inventory					89,270
2)	work in process inventory				56,500
	Factory labor					53,000
3)	Work in process inventory				67800
	manufacturing overhead					67,800
	Account titles & Explanations				Debit	Credit
	finished goods inventory				184,190
	work in process inventory					184,190
	(job 50 +job 51 =
No	Account titles & Explanations				Debit	Credit
	Accounts receivable				316400
	sales					316,400
	cost of goods sold
	finished goods inventory				179,670
	(job 49+job 50)					179,670
finished goods inventory			106,220	Job No 51
			finished goods inventory
	opening		101,700	COGS		179,670
	WIP		184,190
	end bal		106,220
manufacturing overhead			5,650	under applied
		manufacturing overhead
	Actual		73,450	Applied		67,800
	bal		5,650