Question

The Healthy Heart Company uses a normal job-order costing system in its only production department. Overhead is applied to jobs by a plant-wide overhead rate based on direct labor hours. The first year of operation began on December 1, 2018. During the month of December 2018, Healthy Heart purchased direct materials with a total cost of $4,000. Of the $4,000, Healthy Heart used $500 on Job 100. Job 100 was the only job worked during the month of December 2018. Healthy Heart also charged $1,200 in Direct Labor and $800 in Applied Overhead to Job 100 in December. JOB 100 WAS NOT FINISHED IN DECEMBER 2018, SO THE ENDING WIP INVENTORY FOR DECEMBER 31, 2018 WAS $2,500 ALL ON JOB 100. (Hint - remember to set up your Materials Inventory and calculate your ending materials inventory. For the new year (112019-12/31/2019). Healthy Heart had the following transactions. REMEMBER TO TAKE INTO CONSIDERATION THE ABOVE INFORMATION WHEN SETTING UP YOUR JOB SCHEDULE AS WE DID IN CLASSII 1. Estimates for 2019 include $420,000 in Overhead and 30,000 in Direct Labor Hours. 2. Direct Materials purchased during 2019 cost a total of $84,000 3. Direct Materials used on the jobs during 2019 as follows: Jobs Direct Material Cost Job 100 $10,850 Job 101 $20,400 Job 102 $22,900 Job 103 $15,240 Uob 104 $8,210 4. During 2019, Direct Labor HOURS incurred on each job are in the following table. The DIRECT LABOR RATE FOR THESE HOURS WAS $20.00 PER HOUR AND WOULD BE USED TO CALCULATE DIRECT LABOR COST Jobs Direct Labor HOURS Uob 100 4,845 Direct Labor Hours Job 101 6,900 Direct Labor Hours Job 102 9,750 Direct Labor Hours Uob 103 5,850 Direct Labor Hours Uob 104 2,916 Direct Labor Hours 5. By December 31, 2019: - All of Job 100 and 101 were completed. Job 100 consisted of 5,936 units and Job 101 consisted of 21,250 units 6. By December 31, 2019: -All of Job 101 was sold for $50.00 per unit. In addition, 5,000 of the 5,936 units of Job 100 were sold for $80 per unit. SUPER HINT! DON'T FORGET THAT YOU NEED APPLIED OH ON YOUR JOBS AS WELL AS DM & DLI HERE ARE YOUR QUESTIONS - BE SURE YOU PUT IN $ SIGNS and COMMAS AS NEEDED WITH EACH OF YOUR ANSWERS. FOR EXAMPLE OF YOUR ANSWER IS 10On YOU WOULD INSERT $1000n 1000 WOUD RF $10000 OR 1000 WOULD RECOR

Answer 1

1 Beginning Materials inventory for 1/1/2019 Beginning Materials inventory for 1/1/2019 = Raw material purchased in December 2018 - Raw material used in production Beginning Materials inventory for 1/1/2019 = $4,000 - $500 = $3,500 2 Ending Materials inventory for 12/31/2019 Ending Materials inventory for 12/31/2019 = Beginning raw materials inventory + purchases during the year - materials used on the jobs Ending Materials inventory for 12/31/2019 = $3,500 + 84,000 - ($10,850 + $20,400 + $22,900 + $15,240 + $8,210) Ending Materials inventory for 12/31/2019 = $3,500 + 84,000 - $77,600 = $9,900 3 Beginning Work in Process Inventory for 1/1/2019 Beginning Work in Process Inventory for 1/1/2019 = Ending WIP Inventory for December 31, 2018 (Job 100) = $2,500 4 Ending Work in Process Inventory for 12/31/2019 Predetermined overhead rate based on direct labor hours = Estimated overhead cost/Estimated Direct labor hours Predetermined overhead rate based on direct labor hours = $420,000/30,000 = $14 per direct labor hour All of Job 100 and 101 were completed during the year. Job 102, 103 and 104 are not completed till the end of the year. Hence ending work in process inventory shall consist of production cost of Job 102, Job 103 and Job 104 till 12/31/2019 Job 102 Job 103 Job 104 Total Beginning WIP Inventory $0 $0 $0 $0 Direct material cost $22,900 $15,240 $8,210 $46,350 Direct Labor cost $195,000 $117,000 $58,320 $370,320 (Direct labor hours * $20 per hour) Applied overhead $136,500 $81,900 $40,824 $259,224 (Direct labor hours * $14 per hour) Total Production cost $354,400 $214,140 $107,354 $675,894 Ending Work in Process Inventory for 12/31/2019 = $675,894 5 Beginning Finished Goods inventory for 1/1/2019 None of the Jobs were finished till December 31, 2018. Hence there is no finished goods inventory Beginning Finished Goods inventory for 1/1/2019 = $0

6 Ending Finished Goods Inventory for 12/31/2019 All of Job 100 and 101 were completed till 12/31/2019. Out of the above two jobs completed, all of Job 101 was sold and 5,000 of the 5,936 units of Job 100 were sold. Ending Finished Goods Inventory would consist of 936 units of Job 100. Beginning WIP Inventory Direct material cost Direct Labor cost Applied overhead Job 100 $2,500 $10,850 $96,900 $67,830 Total cost of production for 5,936 units of Job 100 = $178,080 Ending Finished Goods Inventory for 12/31/2019 = $178,080/5,936 * 936 = $28,080 Total cost of production $178,080 7 Cost of Goods Manufactured for the year ending 12/31/2019 Schedule of Cost of Goods Manufactured Direct Materials: Beginning Raw materials Inventory $3,500 Add: Raw Material purchases $84,000 Total raw materials available $87,500 Less: Ending Raw Materials Inventory $9,900 Raw Materials used in production Direct Labor Manufacturing Overhead applied to work in process Total Manufacturing Costs Add: Beginning work in process inventory $77,600 $605,220 (30,261 hours * $20) $423,654 (30,261 hours * $14) $1,106,474 $2,500 $1,108,974 $675,894 $433,080 Less: Ending work in process inventory Cost of Goods Manufactured Cost of Goods Manufactured for the year ending 12/31/2019 = $433,080 8 the Unadjusted Cost of Goods Sold for the year ending 12/31/2019 Unadjusted Cost of Goods Sold = Beginning Finished Goods inventory + Cost of goods manufactured - Ending Finished Goods Inventory Unadjusted Cost of Goods Sold = $0 + $433,080 - $28,080 = $405,000 9 Sales Revenue for the year ending 12/31/2019 Sales Revenue on sale of 21,250 units of Job 101 = $50 * 21,250 = $1,062,500 Sales Revenue on sale of 5,000 units of Job 100 = $80 * 5,000 = $400,000 Total sales revenue for the year ending 12/31/2019 = $1,062,500 + $ 400,000 = $1,462,500