Question

Roy Mendinghouse Company employs a job order cost accounting system and keeps perpetual inventory records. The following transactions occurred in the first month of operations Direct materials requisitioned during the month 1. Job 101 $20,000 16,000 Job 102 Job 103 24.000 $60.000 Direct labor incurred and charged to jobs during the month was: $32,000 28,000 20.000 $80.000 2. Job 101 Job 102 Job 103 3. Manufacturing overhead was applied to jobs worked on using a predeternmined overhead rate based on 75 % of direct labor costs. 4. Actual manufacturing overhead costs incurred during the month amounted to $66,000. 5. Job 101 consisting of 1,000 units and Job 103 consisting of 200 units were completed during the month. Instructions (a) Prepare journal entries to record the above transactions. Use the space bar, NOT the tab key, to properly form (b) Answer the following questions: the entries. 1 How much manufacturing overhead was applied to Job 103 during the month? 2. Compute the unit cost of Jobs 101 and 103. 3. What is the balance in Work In Process Inventory at the end of the month? Determine if manufacturing overhead was under- or over-appled during the month. What is the amount of the over or under-applies? computation 4. Show

Answer 1

Ans-

a.
Sr. no.	General Journal	Debit	Credit
1.	Work in Process Inventory	60,000
	Raw Materials Inventory		60,000
2.	Work in Process Inventory	80,000
	Factory Labor		80,000
3.	Work in Process Inventory	60,000
	Manufacturing Overhead		60,000
Notes:	Manufacturing Overhead = Direct labor incurred x predetermined overhead rate
		=$80,000 x 75%
		=$60,000
4.	Manufacturing Overhead	66,000
	Cash or Accounts Payables		66,000
5.	Finished Goods Inventory	135,000
	Work in Process Inventory		135,000
Notes:	Job 101 & Job 103 completed transferred to finished goods inventory
		Job 101	Job 103
	Direct materials	20,000	24,000
	Direct labor	32,000	20,000
	Overhead applied	24000	15000
	[Direct labor incurred x predetermined overhead rate]	[32,000 x 75% ]	[20,000 x 75% ]
	Total cost	76,000	59,000
	Finished Goods Inventory
	Job 101	76,000
	Job 103	59,000
	Finished Goods Inventory	135,000
b.
1.	Manufacturing overhead was applied to Job 103		15,000
Working Notes:	Direct Labor for Job 103 is 20,000
	Manufacturing overhead	15,000
	[Direct labor incurred x predetermined overhead rate]
	[20,000 x 75% = 15,000 ]
2.		Unit cost
	Job 101	76
	Job 103	295
Working Notes:
		Job 101	Job 103
	Direct materials	20,000	24,000
	Direct labor	32,000	20,000
	Overhead applied	24000	15000
	[Direct labor incurred x predetermined overhead rate]	[32,000 x 75% ]	[20,000 x 75% ]
	Total cost	76,000	59,000
	divide by
	Units	1,000	200
	Unit cost	76	295
3.	Balance in Work In Process Inventory at the end of the month		65,000
Working Notes:
	Balance in Work In Process Inventory at the end of the month is Work In Process Inventory on Job 102
		Job 102
	Direct materials	16,000
	Direct labor	28,000
	Overhead applied	21000
	[Direct labor incurred x predetermined overhead rate]
	[28,000 x 75% = 21,000]
	Total cost	65,000
4.	Manufacturing overhead	Underapplied by	$6,000	during the month
Working Notes:
	Actual manufacturing overhead	$66,000
	Manufacturing overhead applied	$60,000
	Underapplied overhead	$6,000	as actual is $6,000 higher than applied manufacturing OH
Notes:	Manufacturing overhead applied
	Manufacturing Overhead = Direct labor incurred x predetermined overhead rate
		=$80,000 x 75%
		=$60,000