Question

SRS Educational Supply Company provides educational materials and supplies to educational institutions. The company provides educational supply needs that includes workbooks, classroom visual aids, instructor support materials, art supplies, lab supplies, and administrative office supplies. Since SRS Educational Supply Company consistently produces the same service to its customers, the company uses job order costing. The company's processing units are assigned costs. For example, the company will determine all of the costs associated with the sales/marketing in a certain period and divide the costs by the number of customers that the company currently has. The cost per customer then becomes a part of the inputs and its used to determine the cost of sales/marketing and the cost of each customer. Service industries often do not match directly the normal costing systems, but the same concepts can still be used to determine the costs per customer.

The SRS Educational Press is wholly owned by the Company. It performs the bulk of its work for the print materials that are sold to the customers. The press also publishes and maintains a stock of books for general sale. The press uses normal costing to cost each job. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost pool (manufacturing overhead, allocated on the basis of direct manufacturing labor costs).

The following data (in thousands) pertain to 2017:

a. Direct materials and supplies purchased on credit: $800

b. Direct materials used: $710

c. Indirect materials issued to various production departments: $100

d. Direct manufacturing labor: $1,300

e. Indirect manufacturing labor incurred by various production departments: $ 900

f. Depreciation on building and manufacturing equipment: $ 400

g. Miscellaneous manufacturing overhead incurred by various production departments: $ 550
     (Ordinarily, this would be detailed as repairs, photocopying, utilities, etc.)

h. Manufacturing overhead allocated at 160% of direct manufacturing labor costs: ?

i. Cost of goods manufactured: $ 4,120

j. Revenues: $ 8,000

k. Cost of goods sold (before adjustment for under-or overallocated manufacturing overhead): $ 4,020

l. Inventories, December 31, 2016 (not 2017):
     Materials control: $ 100
     Work-in-process control: $ 60
     Finished goods control: $ 500

As the accountant, the company has asked you to perform the following tasks:

1. Prepare an overview diagram of the job-costing system at the SRS Educational Press.

2. Prepare journal entries to summarize the 2017 transactions. As your final entry, dispose of the year-end under- or overallocated manufacturing overhead as a write-off to cost of goods sold. Number your entries. Explanations for each entry may be omitted.

3. Show posted T-accounts for all inventories, Cost of Goods Sold, Manufacturing Overhead Control, and Manufacturing Overhead Allocated.

4. How did the SRS Educational Press perform in 2017? Should the company continue to have in-house press production?

Answer 1

This was my answer which was posted long back .Again reposting it.

Job Costing 1 An Overview of the product costing system Indirect Cost Pool Cost Allocation Base Direct manufacturing labor cos Cost Object Print Job Indirect Cost Direct Cost Direct Cost DM DL

2		Journal Entries		3			Material Control
Date	Account Title	Debit-$	Credit-$		Balance 12/31/2016	100	2 Issues	710
1	Material Control	800			1 Purchase	800	3 Issues	100
	Account Payable Control		800		Balance 12/31/2017	90
2	W.I.P Control	710					W.I.P Control
	Material Control		710		Balance 12/31/2016	60	8 Goods Completed	4120
3	Manufacturing OH Control	100			2 Direct Materials	710
	Material Control		100		4-Direct Man Labor	1300
4	W.I.P Control	1300			7-Manu OH allocated	2080
	Manufacturing OH Control	900			Bal-12/31/2017	30
	Wages Payable Control		2200				F.G Control
5	Manufacturing OH Control	400			Balance12/31/2016	500	10- Goods Sold	4020
	Accumulated Depreciation-Building and manufacturing equipment		400		8-Goods Completed	4120
6	Manufacturing OH Control	550			Balance 12/31/2017	600
	Miscellaneous Accounts		550				Cost of Goods Sold
7	W.I.P Control	2080			10-Goods Sold	4020	11 Adjust for over allocation	130
	Manufacturing OH Allocated		2080		Balance 12/31/2017	3890
	1.6*$1300=$2080						Manufacturing OH Control
8	Finished Goods Control	4120			3 Indirect materials	100	11 to Close	1950
	W.I.P Control		4120		4-indirect Manufacturing labor	900
9	Accounts Receivable Control	8000			5 Depreciation	400
	Revenues		8000		6 Misc	550
10	Cost of Goods Sold	4020			Balance	0
	Finished Goods Control		4020				Manufacturing OH Allocated
11	Manufacturing OH Allocated	2080			11 To Close	2080	7 Man OH allocated	2080
	Manufacturing OH Control		1950				Balance	0
	Cost of Goods Sold		130
4	Sales	$8,000
	Less COGS	$3,890
	Gross Margin	$4,110	51.4
	The gross Margin is over 51% which is a very good indicator as the industry average of GM Good ratio above 30% are considered good
	The company did a good job costing of estimating M.O.H .OH was over applied by $130 ie 130/1950 or 6.7%