Basic Job Costing Project
Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours.
At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000.
The following information pertains to December of the current year:
Job 10
Job 11
Job 12
Total
Work-in-process, Dec. 1
$16,000
$26,000
$38,000
$80,000
The following transactions took place during the month of December:
1. Purchased raw materials for $25,000 on credit;
2. Requisitioned and used direct materials for the three jobs:
a. $4,000 for Job 10
b. $4,800 for Job 11
c. $7,200 for Job 12
3. Used indirect materials worth $20,000
4. . Incurred direct labor costs as follows:
a. $ 2,400 for Job 10
b. $3,600 for Job 11
c. $4,000 for Job 12
5. Incurred $30,000 worth of indirect manufacturing labor costs.
6. Depreciation on manufacturing plant and equipment $21,000.
7. During the month of December, the company used the following direct labor hours and machine hours for the three jobs:
Job 10
Job 11
Job 12
Total
Machine hours
400
700
900
2,000
Labor hours
120
180
200
500
Required:
1. Compute the predetermined overhead application rate.
2. Prepare the journal entries for the transactions that took place in December and apply manufacturing overhead to the jobs using the actual machine hours.
3. Determine the total cost associated with each job.
4. If jobs 10 and 12 were completed, prepared the journal entry to move jobs 10 and 12 to finished goods.
5. Delivered job 10 to customers that paid $40,000 cash; prepare the journal entries to sell job 10 and to recognize the associated cost of goods sold.
6. What is the cost assigned to ending work in process (control account)?
7. What is the cost assigned to ending finished goods (control account)?
8. How much was manufacturing overhead over/underapplied?
Basic Job Costing Project
Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours.
At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000.
The following information pertains to December of the current year:
| Job 10 | Job 11 | Job 12 | Total | |
| Work-in-process, Dec. 1 | $16,000 | $26,000 | $38,000 | $80,000 |
The following transactions took place during the month of December:
1. Purchased raw materials for $25,000 on credit;
2. Requisitioned and used direct materials for the three jobs:
a. $4,000 for Job 10
b. $4,800 for Job 11
c. $7,200 for Job 12
3. Used indirect materials worth $20,000
4. . Incurred direct labor costs as follows:
a. $ 2,400 for Job 10
b. $3,600 for Job 11
c. $4,000 for Job 12
5. Incurred $30,000 worth of indirect manufacturing labor costs.
6. Depreciation on manufacturing plant and equipment $21,000.
7. During the month of December, the company used the following direct labor hours and machine hours for the three jobs:
| Job 10 | Job 11 | Job 12 | Total | ||
| Machine hours | 400 | 700 | 900 | 2,000 | |
| Labor hours | 120 | 180 | 200 | 500 |
Required:
| 1. Compute the predetermined overhead application rate. |
| 2. Prepare the journal entries for the transactions that took place in December and apply manufacturing overhead to the jobs using the actual machine hours. 3. Determine the total cost associated with each job. 4. If jobs 10 and 12 were completed, prepared the journal entry to move jobs 10 and 12 to finished goods. 5. Delivered job 10 to customers that paid $40,000 cash; prepare the journal entries to sell job 10 and to recognize the associated cost of goods sold. 6. What is the cost assigned to ending work in process (control account)? 7. What is the cost assigned to ending finished goods (control account)? 8. How much was manufacturing overhead over/underapplied? |
Related questions
Pedriani Company uses a job order cost system and applies overhead to production on the basis of direct labor hours. On January 1, 2017, Job No. 25 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $10,000; direct labor $6,000; and manufacturing overhead $9,000. Job No. 23 had been completed at a cost of $42,000 and was part of finished goods inventory. There was a $5,000 balance in the Raw Materials Inventory account.
During the month of January, the company began production on Jobs 26 and 27, and completed Jobs 25 and 26. Jobs 23 and 25 were sold on account during the month for $63,000 and $74,000, respectively. The following additional events occurred during the month.
1. Purchased additional raw materials of $45,000 on account.
2. Incurred factory labor costs of $33,500. Of this amount, $7,500 related to employer
payroll taxes.
3. Incurred manufacturing overhead costs as follows: indirect materials $10,000;
indirect labor $9,500; depreciation expense on equipment $12,000; and various
other manufacturing overhead costs on account $11,000.
4. Assigned direct materials and direct labor to jobs as follows.
| Job No. | Direct Materials | Direct Labor |
| 25 | $ 5,000 | $ 3,000 |
| 26 | 17,000 | 12,000 |
| 27 | 13,000 | 9,000 |
5. The company uses direct labor hours as the activity base to assign overhead. Direct labor hours incurred on each job were as follows: Job No. 25, 200; Job No. 26, 800; and Job No. 27, 600.
Instructions
(a) Calculate the predetermined overhead rate for the year 2017, assuming Pedriani Company estimates total manufacturing overhead costs of $440,000, direct labor costs of $300,000, and direct labor hours of 20,000 for the year.
(b) Open job cost sheets for Jobs 25, 26, and 27. Enter the January 1 balances on the job cost sheet for Job No. 25.
(c) Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January.
(d) Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in (a). Post all costs to the job cost sheets as necessary.
|
(e) Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry (or entries) to record the completion of any job(s) during the month.
(f) Prepare the journal entry (or entries) to record the sale of any job(s) during the month.
(g) What is the balance in the Work in Process Inventory account at the end of the month? What does this balance consist of?
(h) What is the amount of over- or underapplied overhead?
Deloria Corporation has two production departments, Forming and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Departmentâs predetermined overhead rate is based on machine-hours and the Assembly Departmentâs predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:
| Forming | Assembly | |||||
| Machine-hours | 19,000 | 15,000 | ||||
| Direct labor-hours | 4,000 | 8,000 | ||||
| Total fixed manufacturing overhead cost | $ | 129,200 | $ | 77,600 | ||
| Variable manufacturing overhead per machine-hour | $ | 1.60 | ||||
| Variable manufacturing overhead per direct labor-hour | $ | 3.00 | ||||
During the current month the company started and finished Job T288. The following data were recorded for this job:
| Job T288: | Forming | Assembly | ||
| Machine-hours | 80 | 10 | ||
| Direct labor-hours | 30 | 40 | ||
| Direct materials | $ | 730 | $ | 380 |
| Direct labor cost | $ | 900 | $ | 1,200 |
The total amount of overhead applied in both departments to Job T288 is closest to:
Collini Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Departmentâs predetermined overhead rate is based on machine-hours and the Customizing Departmentâs predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:
| Machining | Customizing | |||||
| Machine-hours | 17,000 | 15,000 | ||||
| Direct labor-hours | 3,000 | 6,000 | ||||
| Total fixed manufacturing overhead cost | $ | 102,000 | $ | 61,200 | ||
| Variable manufacturing overhead per machine-hour | $ | 1.70 | ||||
| Variable manufacturing overhead per direct labor-hour | $ | 4.10 | ||||
During the current month the company started and finished Job T268. The following data were recorded for this job:
| Job T268: | Machining | Customizing | ||||
| Machine-hours | 80 | 30 | ||||
| Direct labor-hours | 30 | 50 | ||||
| Direct materials | $ | 720 | $ | 380 | ||
| Direct labor cost | $ | 900 | $ | 1,500 | ||
The total job cost for Job T268 is closest to:
