Recording Manufacturing and Nonmanufacturing Costs
Reyes Manufacturing Company uses a job order costing system. At the beginning of January, the company had one job in process (Job 201) and one job completed but not yet sold (Job 200). Other select account balances follow (ignore any accounts that are not listed).
Raw Materials Inventory | |
1/1 32,000 |
|
Cost of Goods Sold | |
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Work in Process Inventory | |
1/1 15,500 |
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Manufacturing Overhead | |
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Finished Goods Inventory | |
1/1 20,000 |
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Sales Revenue | |
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During January, the company had the following transactions:
(a)Purchased $60,000 worth of materials on account.
(b)Recorded materials issued to production as follows:
Job Number | Total Cost |
201 | $ 10,000 |
202 | 20,000 |
Indirect materials | 5,000 |
| $ 35,000 |
(c) Recorded factory payroll costs from direct labor time tickets that revealed the following:
Job Number | Hours | Total Cost |
201 | 120 | $ 3,000 |
202 | 400 | 10,000 |
Factory supervision |
| 4,000 |
|
| $ 17,000 |
(d)Applied overhead to production at a rate of $30 per direct labor hour for 520 actual direct labor hours.
(e)Recorded the following actual manufacturing overhead costs:
Item | Total Cost | Description |
Factory rent | $ 2,000 | Paid in cash |
Depreciation | 3,000 | Factory equipment |
Factory utilities | 2,500 | Incurred but not paid |
Factory insurance | 1,500 | Prepaid policy |
| $ 9,000 |
|
(f)Job 201 was completed and transferred to Finished Goods Inventory.
(g)Sold Job 200 for $50,000.
Job 202 was still in process at the end of January.
Required:
1. Complete the following job cost summary to calculate the total cost of the jobs that were worked on during the period.
Job Number | Beg. Balance(given) | Direct Material Cost | Direct Labor Cost | MOH* Applied @ $30 per DL+ hour | Total Cost of Job |
200 | $20,000 | $ 0 | $ 0 | $ 0 | $20,000 |
201 | 15,500 |
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202 | 0 |
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* Manufacturing overhead |
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† Direct labor |
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2. Post the preceding transactions to T-accounts. Create an additional account called Miscellaneous Accounts to capture the offsetting debits and credits to other accounts such as Cash, Payables, Accumulated Depreciation, and so on.
3. Compute the ending balance in the following accounts:
Raw Materials Inventory
Work in Process Inventory
Finished Goods Inventory
Cost of Goods Sold (unadjusted)
Manufacturing Overhead
4. Explain which jobs would appear in Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold. Confirm that the total cost of each job is equal to the ending balance in its respective control accounts.
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