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. 25 26 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. e. 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)Predetermined overhead rate = Estimated overhead/Estimated direct labor hours

                                         = 480000/20000

                                           = $ 24 per DLH

b)

Date	Account title	Debit	credit
A	Raw material inventory	40000
	Accounts payable		40000
	[Material purchased on account]
B	Factory labor	31500
	Wages payable		31500
	[Being labor cost incurred]
C	Factory overhead	40500
	Raw material inventory		10000
	Factory labor		7500
	Accumulated depreciation		12000
	Accounts payable		11000
	[Being actual overhead incurred]
D-1	Work in process inventory	35000
	Raw material inventory		35000
	[Being direct material applied to jobs]
D-2	Work in process inventory	24000
	Factory labor		24000
	[Being direct labor cost incurred]
E	Work in process inventory	38400
	Factory overhead (1600*24)		38400
	[Being overhead applied to jobs]
F	Finished goods inventory (37800+48200)	86000
	Work in process inventory		86000
	[Being jobs 25 and Job 26 completed transferred to finished goods]
G-1	Accounts receivable	137000
	Sales revenue (63000+74000)		137000
G-2	cost of goods sold	79800
	Finished goods inventory (42000+37800)		79800

**Total direct labor hours :200+800+600 = 1600

	Job 23	25	26	27
Beginning	42000	10000+6000+9000=25000
Direct material	0	5000	17000	13000
Direct labor	0	3000	12000	9000
overhead applied		200*24= 4800	800*24= 19200	600*24= 14400
Total cost	42000	37800	48200	36400
	Sold	completed and sold	completed	in process

c)

Raw material inventory	Beginning +purchased-used(both direct and indirect) 8000+40000- 10000 -35000 3000
work in process	Job 27 - 36400   (from table above)
Finished goods inventory	Job 26 -48200

d)

Actual overhead:40500

Applied overhead :38400

Under-applied overhead =Actual -applied

               = 40500 -38400

               = 2100

e)cost 0f goods sold = cost of Job 23 +25

                    = 42000 +37800

                    = 79800