EXERCISE 3â16
Dillon Products manufactures various machined parts to customerspecifications. The company uses a job-order costing system andapplies overhead cost to jobs on the basis of machine-hours. At thebeginning of the year, it was estimated that the company would work240,000 machine-hours and incur $4,800,000 in manufacturingoverhead costs.
The company spent the entire month of January working on a largeorder for 16,000 custom made machined parts. The company had nowork in process at the beginning of January. Cost data relating toJanuary follow:
1.
Raw materials purchased on account, $325,000.
2.
Raw materials requisitioned for production, $290,000 (80% directmaterials and 20% indirect materials).
3.
Labor cost incurred in the factory, $180,000 (one-third directlabor and two-thirds indirect labor).
4.
Depreciation recorded on factory equipment, $75,000.
5.
Other manufacturing overhead costs incurred, $62,000 (creditAccounts Payable).
6.
Manufacturing overhead cost was applied to production on the basisof 15,000 machine-hours actually worked during the month.
7.
The completed job was moved into the finished goods warehouse onJanuary 31 to await delivery to the customer. (In computing thedollar amount for this entry, remember that the cost of a completedjob consists of direct materials, direct labor, and appliedoverhead.)
Required:
1.
Prepare journal entries to record items (a) through (f) above[ignore item (g) for the moment].
2.
Prepare T-accounts for Manufacturing Overhead and Work in Process.Post the relevant items from your journal entries to theseT-accounts.
3.
Prepare a journal entry for item (g) above.
4.
Compute the unit product cost that will appear on the job costsheet.
EXERCISE 3â16
Dillon Products manufactures various machined parts to customerspecifications. The company uses a job-order costing system andapplies overhead cost to jobs on the basis of machine-hours. At thebeginning of the year, it was estimated that the company would work240,000 machine-hours and incur $4,800,000 in manufacturingoverhead costs.
The company spent the entire month of January working on a largeorder for 16,000 custom made machined parts. The company had nowork in process at the beginning of January. Cost data relating toJanuary follow:
1.
Raw materials purchased on account, $325,000.
2.
Raw materials requisitioned for production, $290,000 (80% directmaterials and 20% indirect materials).
3.
Labor cost incurred in the factory, $180,000 (one-third directlabor and two-thirds indirect labor).
4.
Depreciation recorded on factory equipment, $75,000.
5.
Other manufacturing overhead costs incurred, $62,000 (creditAccounts Payable).
6.
Manufacturing overhead cost was applied to production on the basisof 15,000 machine-hours actually worked during the month.
7.
The completed job was moved into the finished goods warehouse onJanuary 31 to await delivery to the customer. (In computing thedollar amount for this entry, remember that the cost of a completedjob consists of direct materials, direct labor, and appliedoverhead.)
Required:
1.
Prepare journal entries to record items (a) through (f) above[ignore item (g) for the moment].
2.
Prepare T-accounts for Manufacturing Overhead and Work in Process.Post the relevant items from your journal entries to theseT-accounts.
3.
Prepare a journal entry for item (g) above.
4.
Compute the unit product cost that will appear on the job costsheet.
Related questions
Dillon Products manufactures various machined parts to customerspecifications. The company uses a job-order costing system andapplies overhead costs to jobs on the basis of machine-hours. Atthe beginning of the year, the company used a cost formula toestimate that it would incur $4,327,500 in manufacturing overheadcost at an activity level of 577,000 machine-hours. |
The company spent the entiremonth of January working on a large order for 9,000 custom mademachined parts. The company had no work in process at the beginningof January. Cost data relating to January follow: |
| a. | Raw materials purchased onaccount, $317,000. |
| b. | Raw materials requisitioned forproduction, $262,000 (80% direct and 20% indirect). |
| c. | Labor cost incurred in thefactory, $153,000, of which $51,000 was direct labor and $102,000was indirect labor. |
| d. | Depreciation recorded on factoryequipment, $63,600. |
| e. | Other manufacturing overheadcosts incurred, $85,500 (credit Accounts Payable). |
| f. | Manufacturing overhead cost was applied to production on thebasis of 40,640 machine-hours actually worked during the month. |
| g. | The completed job was moved into the finished goods warehouse onJanuary 31 to await delivery to the customer. (In computing thedollar amount for this entry, remember that the cost of a completedjob consists of direct materials, direct labor, andapplied overhead.) |
| Required: | |
| 1. | Prepare journal entries to record items (a) through (f) above.[Ignore item (g) for the moment.] (If no entry is requiredfor a transaction/event, select "No journal entry required" in thefirst account field. Do not round intermediatecalculations.) |
| 2. | Prepare T-accounts for Manufacturing Overhead and Work inProcess. Post the relevant items from your journal entries to theseT-accounts. (Do not round intermediatecalculations.) |
| 3. | Prepare a journal entry for item(g) above. (If no entry is required for atransaction/event, select "No journal entry required" in the firstaccount field. Do not round intermediatecalculations.) |
| 4. | Compute the unit product cost that will appear on the job costsheet. (Do not round intermediate calculations. Round youranswer to 2 decimal places.) |
The following cost data relate to the manufacturing activitiesof Chang Company during the just completed year: |
| Manufacturingoverhead costs incurred: | ||
| Indirect materials | $ | 15,800 |
| Indirect labor | 138,000 | |
| Property taxes,factory | 8,800 | |
| Utilities, factory | 78,000 | |
| Depreciation,factory | 150,600 | |
| Insurance, factory | 10,800 | |
| Total actualmanufacturing overhead costs incurred | $ | 402,000 |
| Other costsincurred: | ||
| Purchases of rawmaterials (both direct and indirect) | $ | 408,000 |
| Direct labor cost | $ | 68,000 |
| Inventories: | ||
| Raw materials,beginning | $ | 20,800 |
| Raw materials,ending | $ | 30,800 |
| Work in process,beginning | $ | 40,800 |
| Work in process,ending | $ | 70,800 |
The company uses a predetermined overhead rate to apply overheadcost to jobs. The rate for the year was $20 per machine-hour. Atotal of 20,500 machine-hours was recorded for the year. |
| 1.Compute the amount of underapplied or overapplied overheadcost for the year.
|
