Question

Job Order Costing Name Nelson Company, which uses a job-order costing system, had the following account balances on January 1 of the current year: Raw Materials $18,500 Work in Process $67,200 Finished Goods $88,900 The Work-in-Process Inventory consisted of three jobs: #401 $14,700; #402 $26,900; and N403 $25,600 The Finished Goods Inventory consisted of two jobs, #399 $42,600 and 400 $46,300. Nelson uses a normal costing system with an overhead rate based on machine hours. The following budgeted information was available for 2020: Annual overhead costs $225,000 and machine hours 50,000. During the current year, the following transactions took place: a. Raw materials costing $120,000 were purchased on account. b. Total factory labor charges accrued were $375,000. c. A summary of material requisitions and time tickets appeared as follows: Time Tickets Machine Material Labor Labor Hours Job No. Requisitions Hours Cost Used 401 $9,200 600 $ 14,400 4,700 402 8,700 1.100 26,400 5,300 403 10,600 1,400 33,600 3,800 404 11,200 2,200 52,800 9,200 405 15,700 3,000 72,000 10,700 406 18,900 2,800 67,200 12,000 407 7,800 800 19,200 2,100 408 12,100 1,100 26,400 3,200 sub-total $94,200 13,000 S 312,000 51,000 Indirect 6,800 63,000 Total $101,000 $ 375,000 d. Other factory costs include $76,000 of depreciation on factory equipment, $22,000 of expired factory insurance, $12,000 of accrued property taxes and $45,000 of miscellaneous factory costs paid in cash. e. Job Nos. 401, 402, 404, 406, and 408 were completed. f. Job Nos. 399, 400, 402, 406, and 408 were sold for a total of $700,000 cash. REQUIRED: A. What is the pre-determined annual overhead rate? 34.50 B. Complete the attached cost flow diagram and job order cost sheets. Be sure to enter the beginning balances of the inventory accounts and be sure to compute ending balances for all accounts. C. Prepare all of the required journal entries for the year 2020 in the attached general journal. D. Verify the ending balance of the work-in-process and finished goods inventories by reconciling the balances to the appropriate job cost sheets--make sure that you show E. Prepare the manufacturing statement and a partial income statement through gross profit) for the year. this step

Can you please add steps as to how the numbers were computed? Thanks

Answer 1

A.	Pre-determined annual overhead rate=Annual overhead costs/Estimated machine hours=225000/50000=$ 4.5 per machine hour
B.		Raw materials inventory			Factory payroll
	Ref.	Debit	Ref.	Credit		Ref.	Debit	Ref.	Credit
	Bal.	18500	c.	101000		b.	375000	c.	375000
	a.	120000					375000		375000
		138500		101000
	Bal.	37500
		Work in process inventory			Finished goods inventory
	Ref.	Debit	Ref.	Credit		Ref.	Debit	Ref.	Credit
	Bal.	67200	e.	443700		Bal.	88900	f.	367750
	c.	94200				e.	443700
	c.	312000					532600		367750
	c.					Bal.	164850
	(51000*4.5)	229500
		702900		443700
	Bal.	259200
		Cost of goods sold expense			Factory overhead
	Ref.	Debit	Ref.	Credit		Ref.	Debit	Ref.	Credit
	f.	367750				c.	6800	c.
						c.	63000	(51000*4.5)	229500
						d.
						(76000+22000+12000+45000)	155000
							224800		229500
								Bal.	4700
	e. Cost of jobs completed=Cost of job 401,402,404,406 and 408=59450+85850+105400+140100+52900=$ 443700
	f. Cost of job sold=Cost of job 399,400,402,406 and 408=42600+46300+85850+140100+52900=$ 367750
	Job No.	401		Job No.	402		Job No.	403
	Beg	14700		Beg	26900		Beg	25600
	DM	9200		DM	8700		DM	10600
	DL	14400		DL	26400		DL	33600
	OH	21150		OH	23850		OH	17100
		(4700*4.5)			(5300*4.5)			(3800*4.5)
	Total	59450		Total	85850		Total	86900

404 405 406 Job No. Beg DM 0 Job No. Beg DM 0 Job No. Beg DM 0 18900 11200 52800 15700 72000 DL DL DL OH 41400 OH OH 67200 54000 (12000*4.5) 140100 48150 (10700*4.5) 135850 (9200*4.5) 105400 Total Total Total 407 408 Job No. Beg DM 0 Job No. Beg DM 0 DL DL OH 7800 19200 9450 (2100*4.5) 36450 OH 12100 26400 14400 (3200*4.5) 52900 Total Total Debit a. Credit 120000 120000 C. Journal entries: Ref. Account titles and explanation Raw materials inventory Accounts payable (Materials purchased on account) b. Factory payroll Factory payroll payable (Factory labor charges accrued) 375000 375000

C. 94200 6800 101000 312000 63000 375000 229500 229500 (Factory labor charges accrued) Work in process inventory Factory overhead Raw materials inventory (Material requisition recorded) Work in process inventory Factory overhead Factory payroll (Time ticket recorded) Work in process inventory (51000*4.5) Factory overhead (Factory overhead applied) Factory overhead Accumulated depreciation Prepaid insurance Property taxes payable Cash (Other factory costs incurred) Finished goods inventory Work in process inventory (Cost of jobs completed) Cash Sales (Sales recorded) d. 155000 76000 220001 12000 45000 e. 443700 443700 f. 700000 700000

367750 (Sales recorded) Cost of goods sold expense Finished goods inventory (Cost of goods sold recorded) 367750 D. Ending balance of WIP=$ 259200 Jobs involved in WIP: $ Job 403 86900 Job 405 135850 Job 407 36450 Total 259200 Ending balance of FG=$ 164850 Jobs involved in FG: $ Job 401 59450 Job 404 105400 Total 164850 E. Manufacturing schedule: $ $ Direct materials used: Beginning balance of raw materials 18500

Direct materials used: Beginning balance of raw materials Add: Materials purchased Raw materials avaialble 18500 120000 138500 Less: 6800 37500 Indirect material used Ending balance of raw materials Direct materials used Direct labor Factory overhead applied Total manufacturing costs Add: Beginning work in process Total work in process inventory Less: Ending work in process Cost of goods manufactured 94200 312000 229500 6357001 67200 702900 259200 443700 Partial income statement: $ Sales Less: Cost of goods sold expense Gross profit 700000 367750 3322501