Question

Problem 2-1A (Video) Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2020, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $21,800, direct labor $13,080, and manufacturing overhead $17,440. As of January 1, Job 49 had been completed at a cost of $98,100 and was part of finished goods inventory. There was a $16,350 balance in the Raw Materials Inventory account. During the month of January, Lott Company 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 $132,980 and $172,220, respectively. The following additional events occurred during the month 1. 2. 3. Purchased additional raw materials of $98,100 on account. Incurred factory labor costs of $76,300. Of this amount $17,440 related to employer payroll taxes. Incurred manufacturing overhead costs as follows: indirect materials $18,530; indirect labor $21,800; depreciation expense on equipment $13,080; and various other manufacturing overhead costs on account $17,440 Assigned direct materials and direct labor to jobs as follows 4. Job No Direct Materials Direct Labor 50 51 52 $10,900 42,510 32,700 $5,450 27,250 21,800 Calculate the predetermined overhead rate for 2020, assuming Lott Company estimates total manufacturing overhead costs of $915,600, direct labor costs of $763,000, and direct labor hours of 21,800 for the year Predetermined overhead rate

Answer 1

a) Predetermined overhead rate = Total manufacturing overhead costs/ direct laboour Cost
Predetermined overhead rate = $915600/$763000	120.00%
b)
Account Titles and Explanation	Debit	Credit
1)
Raw Materials Inventory	$     98,100.00
Accounts Payable		$ 98,100.00
2)
Factory Labor	$     76,300.00
Factory Wages Payable		$ 58,860.00
Employer Payroll Taxes Payable		$ 17,440.00
3)
Manufacturing Overhead	$     70,850.00
Accounts Payable		$ 17,440.00
Accumulated Depreciation		$ 13,080.00
Raw Materials Inventory		$ 18,530.00
Factory Labor		$ 21,800.00
c)
1)
Work in Process Inventory	$     86,110.00
Raw Materials Inventory   ($10900 + $42510 + $32700)		$ 86,110.00
Work in Process Inventory	$     54,500.00
Factory Labor ($5,450 + $27,250 + $21800)		$ 54,500.00
Work in Process Inventory	$     65,400.00
Manufacturing Overhead   ($54,500 X 120% of direct labor costs)		$ 65,400.00
d)
Job Cost Sheets
Job No. 50
Date	Direct Materials	Direct Labor	Manufacturing Overhead
Beg.	$     21,800.00	$ 13,080.00	$ 17,440.00
Jan.	$     10,900.00	$   5,450.00	$   6,540.00
Total	$     32,700.00	$ 18,530.00	$ 23,980.00
Cost of completed job
Direct materials	$     32,700.00
Direct labor	$     18,530.00
Manufacturing overhead	$     23,980.00
Total cost	$     75,210.00
Job No. 51
Date	Direct Materials	Direct Labor	Manufacturing Overhead
Jan.	$     42,510.00	$ 27,250.00	$ 32,700.00
Cost of completed job
Direct materials	$     42,510.00
Direct labor	$     27,250.00
Manufacturing overhead	$     32,700.00
Total cost	$ 1,02,460.00
Job No. 52
Date	Direct Materials	Direct Labor	Manufacturing Overhead
Jan.	$     32,700.00	$ 21,800.00	$ 26,160.00