Question

Mastery Problem: Job Order Costing Purl of Great Price Company Maria Young is the sole stockholder of Purl of Great Price Company (POGP Company), which produces high-end knitted sweaters and sweater vests for sale to retail outlets. The company started in January of the current year, and employs three knitters (each of whom work 40 hours per week) and one office manager/knitting supervisor (this employee works 20 hours per week as office manager, and 20 hours per week as knitting supervisor). All wages are paid in cash at the end of each month. Each knitter has a knitting machine that is used about 2/3 of the knitter's time, the rest of the knitter's time being involved in hand knitting and piecing together the garments. The company also has a packaging machine used to wrap the garments in plastic for shipping, which is operated by the office manager/knitting supervisor approximately 5 hours per week. The knitting machines were purchased on January 1 of the current year, and cost $2,400 each, with an anticipated useful life of 10 years and no salvage value. The packaging machine was purchased on the same date and cost $4,800, with the same anticipated useful life and salvage value.

Answer 1

Predetermined Overhead rate = ($1200+(30000 x 50%) +4800+12000) / 6250 = $5.28 per DLH

Job 62
	Direct material	Direct labor	Factory Overhead	Total
Balance Dec 1	$         5,000	$             300	$             104	$         5,404
Dec. 15	$                -	$         3,000	$         1,056	$         4,056
Total Cost	$         5,000	$         3,300	$         1,160	$         9,460
Unit Cost				$         94.60
Job 83
	Direct material	Direct labor	Factory Overhead	Total
Balance Dec 1	$                -	$                -	$                -	$                -
Dec. 10	$         3,500			$         3,500
Dec. 31		$         4,500	$         1,584	$         6,084
Total Cost	$         3,500	$         4,500	$         1,584	$         9,584

Date	Account Titles	Debit	Credit
10-Dec	Work in Process	$            3,500
	Materials		$         3,500
15-Dec	Work in Process	$            3,000
	Wages Payable		$         3,000
15-Dec	Work in Process	$            1,056
	Factory Overhead		$         1,056
21-Dec	Finished Goods	$            9,460
	Work in Process		$         9,460
22-Dec	Accounts Receivable	$            9,375
	Sales		$         9,375
22-Dec	Cost of Goods Sold	$            7,095
	Finished Goods		$         7,095
31-Dec	Work in Process	$            4,500
	Wages Payable		$         4,500
31-Dec	Work in Process	$            1,584
	Factory Overhead		$         1,584
31-Dec	Factory Overhead	$            3,625
	Wages Expense	$            1,250
	Wages Payable	$            7,500
	Cash		$       12,275
	Accumulated Depreciation		$             100

Actual Factory Overhead = $3625

Overhead applied = $1056+1584 = $2640
Underapplied overhead = $3625-2640 = $985

Date	Account Titles	Debit	Credit
31-Dec	Cost of Goods Sold	$                970
	Factory Overhead		$             970

Work in Process = $9584
Finished Goods = 25 x $94.60 = $2365
Factory Overhead = 0
Cost of Goods Sold = $255040+7095-970 = $261165

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Answer 2

How did you get $970 for Cost of goods sold/factory overhead.