Question

Sail Away takes special orders to manufacture sail boats for high end customers. Complete the job cost sheets for Sail Away for September based on the following information. Prepare journal entries to record the transactions as well as post to the job cost sheets.

a. Purchased raw materials on credit, $145,000.
b. Materials requisitions: Job 240, $48,000; Job 241, $36,000; Job 242, $42,000; indirect materials were $12,000.
c. Paid $130,000 for factory wages.
d. Time tickets used to charge labor to jobs: Job 240, $40,000; Job 241, $30,000; Job 242, $35,000, indirect labor is $25,000.
e. The company incurred the following additional overhead costs: depreciation of factory building, $70,000; depreciation of factory equipment, $60,000; expired factory insurance, $10,000; utilities and maintenance cost of $20,000 were paid in cash. (Hint: Be careful – Cash is not your only credit).
f. Applied overhead to all three jobs. The predetermined overhead rate is 190% of direct labor cost.
g. Transferred jobs 240 and 242 to Finished Goods Inventory.
h. Sold job 240 for $300,000 for cash.
i. Closed the under- or over-applied overhead account balance.

Answer 1

Company Name
Individual Job sheets
Job	Job 240	Job 241	Job 242	Total
Direct material cost	$          48,000	$          36,000	$          42,000	$        126,000
Direct labor cost	$          40,000	$          30,000	$          35,000	$        105,000
Applied overhead (Direct labor cost * 190%)	$          76,000	$          57,000	$          66,500	$        199,500
Total cost	$        164,000	$        123,000	$        143,500	$        430,500
Status	Finished goods (sold)	In progress	Finished goods (unsold)
Cost included in	Cost of goods sold	Work in progress inventory	Finished goods inventory

Sail Away
Journal entries
Date	General Journal	Debit	Credit
A	Raw material inventory	145,000
	Account payable		145,000
	(To record Purchase of raw material inventory
B 1	Work in progress inventory	126,000
	Raw material inventory		126,000
	(To record Issue of raw material inventory into production process.)
B 2	Manufacture overhead	12,000
	Raw material inventory		12,000
	(To record Issue of indirect raw material inventory for Manufacturing.)
C	Wages Payable	130,000
	Cash		130,000
	(To record Paid $130,000 for factory wages.)
D 1	Work in progress inventory	105,000
	Wages Payable		105,000
	(To record direct labor Consumed.)
D 2	Manufacture overhead	25,000
	Wages Payable		25,000
	(To record indirect labor Consumed.)
E	Manufacture overhead	160,000
	Accumulated depreciation - factory building		70,000
	Accumulated depreciation - factory equipment		60,000
	Prepaid Insurance		10,000
	Cash		20,000
	(To incurred Manufacture overhead.)
F	Work in progress inventory	199,500
	Manufacture overhead		199,500
	(To record Manufacture overhead Applied to Job.)
G	Finished goods inventory	307,500
	Work in progress inventory		307,500
	(To record completion of Finished goods inventory.) (164000+143500)
H	Cost of goods sold	164,000
	Finished goods inventory		164,000
	(To record Finished goods Inventory sold.)
H	Cash	300,000
	Sales Revenue		300,000
	(To record sales revenue.)
I	Manufacture overhead	2,500
	Cost of goods sold		2,500
	(To record over applied of manufacture overhead.)

Indirect materials	$          12,000
Indirect labor	$          25,000
Depreciation of factory building	$          70,000
Depreciation of factory equipment	$          60,000
Factory insurance	$          10,000
Utilities and maintenance cost	$          20,000
Total Manufacture overhead incurred	$        197,000
Less: Manufacture overhead Applied	$        199,500
Under (Over) applied of overhead	$          (2,500)
Over applied of overhead	$            2,500