Question

Christopher's Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2018 follow: Raw Materials Inventory Work in Process Inventory Finished Goods Inventory $16,200 6,600 20,600 The following transactions occurred during January: (a) Purchased materials on account for $26,800. (b) Issued materials to production totaling $21700, 90 percent of which was traced to specific jobs and the remainder of which was treated as Indirect materials (c) Payroll costs totaling $19,200 were recorded as follows: $11,000 for assembly workers 1,400 for factory supervision 1,000 for administrative personnel 1,800 for sales commissions (d) Recorded depreciation: $6,000 for factory machines, $500 for the copler used in the administrative office. (e) Recorded $1,000 of expired insurance, Forty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense. Paid $5,800 in other factory costs in cash. (g) Applied manufacturing overhead at a rate of 200 percent of direct labor cost. (n) Completed all jobs but one; the job cost sheet for the uncompleted job shows $2,500 for direct materials, $2,400 for direct labor, and $4,800 for applied overhead. Sold jobs costing $51,800. The revenue earned on these jobs was $67,340.

Answer 1

Answer-

1. T-accounts

Raw Materials Inventory		Work in Process Inventory
	Debit	Credit				Debit	Credit
Beg. Bal.	16200				Beg. Bal.	6600
(a)	26300	21700	(b)		(b)	19530
End. Bal.	20800				(c)	11000
					(g)	22,000	49,430	(h)
					End. Bal.	9700
Finished Goods Inventory		Cost of Goods Sold (COGS)
	Debit	Credit				Debit	Credit
Beg. Bal.	20600				(i)	51800
(h)	49430	51800	(i)
End. Bal.	18230				End. Bal.	51800
Manufacturing Overhead		Selling, General, Administrative Exp.
	Debit	Credit				Debit	Credit
(b)	2170				(c)	1000
(c)	1400				(c)	1800
(d)	6000				(d)	500
(e)	400				(e)	600
(f)	5800	22000	(g)
End. Bal.		6230			End. Bal.	3,900
Sales Revenue		Other Accounts
	Debit	Credit				Debit	Credit
		67340	(i)				26800	(a)
							11000	(c)
End. Bal.		67340					1400	(c)
							1000	(c)
							1800	(c)
							6000	(d)
							500	(d)
							1000	(e)
							5800	(f)
					End. Bal.		55300

2. Unadjusted gross profit = Sales revenue - Cost of goods sold = $67340 - $51800 = $15540

3. Manufacturing overhead $6230 underapplied

Actual overheads $15770 - Overheads applied $22000 = Overapplied overheads $6230

4. Adjusted gross profit = Sales revenue - Adjusted cost of goods sold = $67340 - $45570 = $21770

Adjusted cost of goods sold = Cost of goods sold $51800 - Overapplied overheads $6230 = $45570

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