Question

Broomhilda manufactures broomsticks for her fellow witch (and wizard) friends. Broomhilda uses a job order cost system and applies overhead to production on the basis of direct labor cost. On September 1, Job 50 (a super deluxe broom complete with a separate sleep space and shower area as well as an espresso machine) was the only job in process. The costs incurred prior to September on this job were as follows: direct materials $20,000, direct labor $12,000, and manufacturing overhead $16,000. As of September 1, Job 49 (a broom shaped like a cat with some extra cargo space for all the cats) had been completed at a cost of $90,000 and was part of finished goods inventory. There was a $15,000 balance in the Raw Materials Inventory account. During the month of September, Broomhilda began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $122,000 and $158,000, respectively. The following additional events occurred during the month.
1. Purchased additional raw materials of $90,000 on account.
2. Incurred manufacturing overhead costs as follows: indirect materials $17,000 (including broom polish and specially crafted scissors to trim stray twigs), indirect labor $20,000 (Hansel and Gretel clean the shop and run errands for the elves), depreciation expense on equipment $12,000 (Broomhilda has multiple molding stations for each broom she creates), and various other manufacturing overhead costs on account $16,000.
3. Assigned direct materials and direct labor to jobs as follows: Job No. Direct Materials Direct Labor 50 $10,000 $5,000 51 39,000 25,000 52 30,000 20,000

Job no.	Direct Materials	Direct Labor
50	10,000	5,000
51	39,000	25,000
52	30,000	20,000

.Required:
1. Calculate the predetermined overhead rate for September, assuming Broomhilda estimates total manufacturing overhead costs of $840,000 and direct labor costs of $700,000 for September.
2. Open job cost sheets for Jobs 50, 51, and 52. Enter the September 1 balances on the job cost sheet for Job 50.
3. Prepare the journal entries to record the purchase of raw materials, and the manufacturing overhead costs incurred during the month of March.
4. Prepare the summary journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning overhead costs, use the overhead rate calculated in (1). Post all costs to the job cost sheets as necessary.
5. Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry (or entries) to record the completion of any job(s) during the month.
6. Prepare the journal entry (or entries) to record the sale of any job(s) during the month.
7. What is the balance in the Finished Goods Inventory account at the end of the month? What job(s) does this balance consist of? 8. What is the amount of over- or underapplied overhead? Prepare the journal entry to close this to Cost of Goods Sold

Answer 1

Answer:

(1.) Predetermined rate overhead rate for 2020,assuming Broomhilda estimates total manufacturing overhead costs of $840,000, direct labor costs of $700,000, and direct labor hours of 20,000 for the year :-

Predetermined overhead rate =Total estimated manufacturing overhead cost /direct labor costs

= $8,40,000 / $7,00,000

= 1.2 or 120% of direct Labor cost

(2.) Job Cost sheets for Job 50, 51, 52 :-

Job 50
	Direct Material	Direct Labor	Manufacturing overhead
Opening bal.	20,000	12,000	16,000
September	10,000	5,000	6,000
Cost of completed job	30,000	17,000	22,000

Total Cost of job 50 = $30,000 + $17,000 + $ 22,000

= $69,000

Job 51
	Direct Material	Direct Labor	Manufacturing overhead
September	39,000	25,000	30,000
Cost of completed job	39,000	25,000	30,000

Total cost of job 51 = $39,000 + $25,000 + $30,000

= $94,000

Job 52
	Direct Material	Direct Labor	Manufacturing overhead
September	30,000	20,000	24,000
Cost of completed job	30,000	20,000	24,000

Total cost of job 52 = $30,000 + $20,000 + $24,000

= $ 74,000

(3.) Following are the journal entries to record the purchase of raw material and manufacturing overhead cost :-

No.	Account Title and Explanation	Debit $	Credit $
1	Raw Material	90,000
	Accounts Payable		90,000
	( being raw material purchased)
2	Manufacturing overhead	65,000
	Raw material		17,000
	Factory labor		20,000
	Accumulated depreciation		12,000
	Accounts payable		16,000
	( being manufacturing overhead cost incurred)

(4.) Following are the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production:

No.	Account Title and Explanation	Debit $	Credit $
1	Work in progress inventory ($10000+39000+30000)	79,000
	Raw material inventory		79,000
	(To Record the assignment of direct materials)
2	Work in progress inventory($5000+$25000+$20000)	50,000
	Factory Labor		50,000
	(To Record the assignment of Direct labor)
3	Work in progress inventory( $ 50000*120%)	60,000
	Manufacturing overhead		60,000
	(To assign manufacturing overhead to production)

(5.) Total of job cost sheets for any job(s) completed during the month and the journal entry to record the completion of any job(s) during the month.

No.	Account Title and explanation	Debit $	Credit $
	Finished good ($69000+$94000)	163,000
	Work in Progress		163,000
	(To record completion of job 50 and 51)

(6.) Journal entry (or entries) to record the sale of any job(s) during the month

No.	Account Title and Explanation	Debit $	Credit $
1	Accounts receivable ($122,000 + $158,000)	280,000
	Sales		280,000
	(To Record sales made)

(7.) The balance of finished good inventory account at the end of the month

Job 51 = $94000

Finished Goods Inventory
Opening	90,000	COGS (90000+69000)	159,000
WIP (69000+94000)	163,000
Ending Balance	94,000

The balance in the account consists of the cost of completed Job no. 51 which has not yet been sold.

(8.) Amount of Over- or Underapplied Overhead

Applied - Actual = $60,000 - $65,000 = - $5,000 (Under applied)

The balance in the manufacturing overhead account is Under applied.

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