Question

Waterway and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concerning the three audit jobs conducted during November. Direct materials Auditor labor costs Auditor hours Waters Inc. $690 $5,600 77 Renolds Inc. $480 $6,900 89 Bayfield Inc. $250 $3,675 46 Overhead costs are applied to jobs on the basis of auditor hours, and the predetermined overhead rate is $57 per auditor hour. The Waters Inc. job is the only incomplete job at the end of November. Actual overhead for the month was $12,700. (a) Determine the cost of eachjob. Cost Waters $ Renolds $ Bayfield $ (b) Indicate the balance of the Service Contracts in Process account at the end of November. Balance in service contracts in process account $ (c) Calculate the ending balance of the Operating Overhead account for November Balance in operating overhead account

Answer 1

Waterway and Associates Answer:

a) Cost of each job is:

Particulars	Amount ($)
Waters ( 690 + 5,600 + 4,389 (77*57))	10,679
Renolds (480 + 6,900 + 5,073 (89*57))	12,453
Bayfield (250 + 3,675 + 2,622 (46*57))	6,547

b) Balance of the Service Contracts in Process account at the end of November:

Waters work’s is incomplete therefore the balance of the service contract in process is $10,679.

c) Ending balance of the Operating Overhead account for November:

Particulars	Amount ($)
Overhead Applied (4,389 + 5,073 + 2,622)	12,084
Actual Overhead (Given)	12,700
Balance	616

Coronado Company Answer:

Predetermined Overhead Rate for 2020 = 120% ($898,800/$749,000)*100

Job No. 50
Date	Direct Materials	Direct Labour	Manufacturing Overheads
Beg. Balance	$21,400	$12,840	$17,120
January	$10,700	$5,350	$6,420(5,350 * 120%)
	$32,100	$18,190	$23,540
Cost of Completed Job
Direct Material			$32,100
Direct Labour			$18,190
Manufacturing Overheads			$23,540
Total Cost			$73,830

Job No. 51
Date	Direct Materials	Direct Labour	Manufacturing Overheads
January	$41,730	$26,750	$32,100 (26,750 * 120%)
	$41,730	$26,750	$32,100
Cost of Completed Job
Direct Material			$41,730
Direct Labour			$26,750
Manufacturing Overheads			$32,100
Total Cost			$100,580

The journal entry for the purchase of material, labour and manufacturing overhead is passed. Assuming all transactions are done in Cash.

Journal Entries Description Debit ($) Credit ($) 96,300 1 Raw Material Cash (Being raw material purchased) 96,300 74,900 2 Labour Cost Cash (Being Labour Cost incurred) 74,900 3 Indirect Material Indirect Labour Depreciation expense on Equipment Other Manufacturing Overhead Cash (Being manufacturing overhead incurred) 18,190 21,400 12,840 17,120 69,550