Question

The following account appears in the ledger after only part of the postings have been completed for July, the first month of the current fiscal year:

Work in Process
Balance, July 1
60,200

Direct materials
147,000

Direct labor
120,000



Factory overhead is applied to jobs at the rate of 60% of direct labor cost. The actual factory overhead incurred for July was $75,000. Jobs completed during the monthtotaled $301,200.

(a) Prepare the journal entries to record (1) the application of factory overhead to production during July and (2) the jobs completed during July.

(b) What is the balance of the factory overhead account on July 31?

(c) Was factory overhead overapplied or underapplied on July 31?

(d) Determine the cost of the unfinished jobs on July 31.

Answer 1

The following account appears in the ledger after only part of the postings have been completed for July, the first month of the current fiscal year:

                   Work in Process              
Balance, July 1    53,200 |                  
Direct materials 147,000 |                  
Direct labor      120,000 |                  

Factory overhead is applied to jobs at the rate of 60% of direct labor cost. The actual factory overhead incurred for July was $75,000. Jobs completed during the month totaled $301,200
.
(a)     Prepare the journal entries to record (1) the application of factory overhead to production during July and (2) the jobs completed during July.     

(1)	Work in Process	72,000
	Factory Overhead		72,000
(2)	Finished Goods	301,200
	Work in Process		301,200

(b)     What was the balance of the factory overhead account on July 31?     

= $75,000 - $72,000

= $3,000 Debit
          
(c)     Was factory overhead overapplied or underapplied on July 31?     

Underapplied
          
(d)     Determine the cost of the unfinished jobs on July 31.

Total debits to Work in Process:
Balance, July 1	$ 53,200
Direct materials	147,000
Direct labor	120,000
Factory overhead	72,000	$392,200
Less cost of goods finished during July		301,200
Balance, Work in Process, July 31
(cost of unfinished jobs)		$ 91,000
		========

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