Question

Weinrich Manufacturing uses a job order cost system and applies overhead to production on the basis of direct labor hours. On January 1, 2019, Job No. 25 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $10,000; direct labor $6,000; and manufacturing overhead $9,000. Job No. 23 had been completed at a cost of $42,000 and was part of finished goods inventory. There was a $8,000 balance in the Raw Materials Inventory account. During the month of January, the company began production on Jobs 26 and 27, and completed Jobs 25 and 26. Jobs 23 and 25 were sold on account during the month for $63,000 and $74,000, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $40,000 on account. 2. Incurred total factory labor costs of $31,500. 3. Incurred manufacturing overhead costs as follows: indirect materials $10,000; indirect labor $7,500; depreciation expense $12,000, and various other manufacturing overhead costs on account $11,000. 4. Assigned direct materials and direct labor to jobs as follows. Job No. Direct Materials $ 5,000 17,000 13.000 $35,000 Direct Labor $ 3,000 12,000 9,000 $24,000 27 Total 5. The company uses direct labor hours as the activity base to assign overhead. Direct labor hours incurred on each job during the month were as follows: Job No. 25 - 200 hours Job No. 26-800 hours Job No. 27 - 600 hours Instructions a. Calculate the predetermined overhead rate for the year 2019, assuming Weinrich estimates total manufacturing overhead costs of $480,000, direct labor costs of $300,000, and direct labor hours of 20,000 for the year. b. Prepare all necessary journal entries based on above information. c. What is the end of the month balances in Raw Materials, Work in Process, and Finished Goods Inventory? d. What is the amount of over or under-applied overhead? e. What is Cost of Goods Sold for the period?

Answer 1

a)
Estimated Manufacturing overhead (a)	$480,000.00
Direct labor hours (b)	20,000
Predetermined overhead rate (a) ÷ (b)	$24.00	Per DLH
b)
GENERAL JOURNAL
	DEBIT	CREDIT
Raw Materials Inventory	$           40,000.00
Accounts Payable		$   40,000.00
(Purchase of raw materials on account)
Factory Labor	$           31,500.00
Factory Wages Payable		$   31,500.00
Manufacturing Overhead	$           40,500.00
Accumulated Depreciation		$   12,000.00
Raw Materials Inventory		$   10,000.00
Factory Labor		$     7,500.00
Accounts Payable		$   11,000.00
Work in Process Inventory	$           35,000.00
Raw Materials Inventory		$   35,000.00
Work in Process Inventory	$           24,000.00
Factory Labor ($3,000 + $12,000 + $9,000)		$   24,000.00
Work in Process Inventory	$           38,400.00
Manufacturing Overhead		$   38,400.00
(200 + 800 + 600) X $24 per hour
Finished Goods Inventory	$           86,000.00
Work in Process Inventory		$   86,000.00
Accounts Receivable	$         137,000.00
Sales ($63,000 + $74,000)		$ 137,000.00
Cost of Goods Sold ($42000 + 37800)	$           79,800.00
Finished Goods Inventory		$   79,800.00
c)
Raw material
Beginning Bal.	$             8,000.00
Add: Raw material purchased	$           40,000.00
Less: Indirect Material	$         (10,000.00)
Less Work in progress	$         (35,000.00)
Ending Bal.	$             3,000.00
Work in Progress
Beginning Bal (job 25) (10000+6000+9000)	$           25,000.00
Direct Material	$           35,000.00
Direct Labour	$           24,000.00
Manufacturing Overhead	$           38,400.00
Less: Finished Goods inventory (Cost of completed jobs 25 and 26)
Ending Bal.
Finished Goods Inventory
	Job 25	Job 26
Direct material	$           15,000.00	$   17,000.00
Direct Labour	$             9,000.00	$   12,000.00
Manufacturing Overhead	$           13,800.00	$   19,200.00
Total	$           37,800.00	$   48,200.00
Total finished goods inventory	$           86,000.00
d)
Manufacturing overhead applied	$           38,400.00
Less: Actual overhead	$           40,500.00
Under applied	$             2,100.00
e)
Cost of good sold (calculated above)	$           79,800.00