Question

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost 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 $4,252,500 in manufacturing overhead cost at an activity level of 567,000 machine-hours. The company spent the entire month of January working on a large order for 12,700 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, $315,000. b. Raw materials used in production, $271,000 (80% direct materials and 20% indirect materials). c. Labor cost accrued in the factory, $150,000 (one-third direct labor and two- thirds indirect labor). d. Depreciation recorded on factory equipment, $63,900. e. Other manufacturing overhead costs incurred on account, $84,000. f. Manufacturing overhead cost was applied to production on the basis of 401980 machine-hours actually worked during the month. g. The completed job for 12,700 custom-made machined parts 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.)

Answer 1

Required 1:

NO	General Journal	Debit	Credit
a)	Raw Materials	$ 315,000
	Accounts payable		$ 315,000
	(To record Raw materials purchase )
b)	Work in process ($271,000 * 80 % )	$ 216,800
	Manufacturing Overhead ($271,000*20 %)	$ 54,200
	Raw Materials		$ 271,000
	(To record Raw materials used in production )
c)	Work in process ($150,000* 1 / 3 )	$ 50,000
	Manufacturing Overhead ($150,000* 2/3 )	$ 100,000
	Wages and Salaries payable		$ 150,000
	(To record labor cost accrued in factory )
d)	Manufacturing Overhead	$ 63,900
	Accumulated Depreciation		$ 63,900
	( To record depreciation on factory equipment )
e)	Manufacturing Overhead	$ 84,000
	Accounts payable		$ 84,000
f)	(To record other manufacturing overhead costs incurred)
	Work in process	$ 307,350
	Manufacturing Overhead (see note 1 )		$ 307,350
	(To record Manufacturing overhead cost applied to production )

Note 1 :

Predetermined overhead rate = Estimated manufacturing overhead/ Estimated machine hours

Predetermined overhead rate = $ 4,252,500 / 567,000 machine hours

Predetermined overhead rate = $ 7.50 per machine hour

Manufacturing overhead cost applied = 40,980 machine hour * $ 7.50

Manufacturing overhead cost applied = $ 307,350

Required 2 :

Manufacturing Overhead					Work in process
(B)	$ 54,200	F)	$ 307,350		B)	$ 216,800	Finished goods	$ 574,150
C)	$ 100,000				C)	$ 50,000
D)	$ 63,900				F)	$ 307,350
E)	$ 84,000
Balance	$ 5250

Required 3 :

NO	General Journal	Debit	Credit
g)	Finished goods (216,800+50,000+307,350)	$ 574,150
	Work in process		$ 574,150
	(To record completed goods transferred to finished goods warehouse )

Required 4 :

Unit product cost = $ 574,150 / 12,700

Unit product cost = $ 45.21 per unit