Question

Objectives: 1. To improve your quantitative literacy skills by completing a problem on job costing with multiple jobs using Excel 2. To improve your understanding of job costing by prorating over/under-applied overhead cost to inventory and completing the related journal entry Davy Systems manufactures automated testing equipment. The company uses a job-order costing system and applies overhead on the basis of machine-hours. At the beginning of the year, estimated manufacturing overhead costs were $3,200,000 and the estimated machine-hours were 80,000. Data regarding several jobs at Davy are presented below. WIP Total Machine Hours โanual WIP - January MOA Cost Job Number XJ107 ST211 SD108 SL 205 RX115 Total Beginning Balance 123.000 120,000 20.000 30,000 WIP - January Direct Materials 4,000 3,000 80,000 60,000 20,000 $167,000 WIP - January Direct Labor 8.000 10,000 34.000 30.000 20.000 $102,000 900 1.150 2.000 1.000 1,200 6.250 $293,000 By the end of the first month (January), all jobs but RX-115 were completed, and all completed jobs had been delivered to customers except for SL-205. The balance in Finished Goods inventory at the start of January is $0. At the end of January, the actual manufacturing overhead cost is $150,000. The company prorates over/under- applied overhead cost at the end of each month using the amounts of applied manufacturing overhead cost in work-in-process control, finished goods control, and cost of goods sold as the basis for proration. Required (show your work in Excel): Complete the table above to answer the following questions: Item Answer a. What is the predetermined manufacturing overhead rate? What are the amounts of manufacturing overhead allocated to the five jobs in January? What is the balance in work-in-process inventory (Job RX115) at the end of January after proration? What was the balance in finished goods inventory (Job SL205) at the end of January after proration? What was the balance of cost of goods sold at the end of January after proration? f. Show the compound journal entry to move the over/under-applied manufacturing overhead cost to the three accounts.

Answer 1

a. Predetermined overhead rate = $3200000 / 80000 = $40 per machine hour

Job	Beg Bal	Direct Material	Direct Labor	MOA	Total Cost
XJ107	$        123,000	$            4,000	$           8,000	$     36,000	$        171,000
ST211	$        120,000	$            3,000	$         10,000	$     46,000	$        179,000
SD108	$           20,000	$          80,000	$         34,000	$     80,000	$        214,000
SL205	$           30,000	$          60,000	$         30,000	$     40,000	$        160,000
RX115	$                    -	$          20,000	$         20,000	$     48,000	$          88,000
Total	$        293,000	$       167,000	$       102,000	$   250,000	$        812,000

b. Manufacturing Overhead allocated = $250000

c. Over applied overhead = $250000 - 150000 = 100000
Balances before proration
Work in process = $88000
Finished Goods = $160000
Cost of Goods Sold = $564000

Work in process after proration = $88000 - $100000 x 88/812 = $77162

d. Finished Goods inventory after proration = $160000 - $100000 x 160/812 = $140296

e. Cost of Goods sold after proration = $564000 - $100000 x 564/812 = $494542

f.

Account Titles	Debit	Credit
Manufacturing Overhead	$        100,000
Work in Process Inventory		$          10,838
Finished Goods Inventory		$          19,704
Cost of Goods Sold		$          69,458