Question

Elliott Manufacturing uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department A, direct labor hours in Department B, and machine hours in Department C. In establishing the predetermined overhead rates for 2010 the following estimates were made for the year

Department

                                          A                  B           C

Manufacturing overhead                $780,000            $640,000      $750,000

Direct labor cost                             $600,000            $100,000     $600,000

Direct labor hours                          50,000         40,000          40,000

Machine hours                         100,000              120,000       150,000

During January, the job cost sheets showed the following costs and production data

                                          A           B                  C

Direct materials used                            $92,000       $86,000              $64,000

Direct labor cost                             $48,000       $35,000              $50,400

Manufacturing overhead incurred        $66,000       $60,000              $62,100

Direct labor hours                          4,000            3,500                4,200

Machine hours                         8,000            10,500              12,600

Instructions

1. Compute the predetermined overhead rate for each department.(b) Compute the total manufacturing costs assigned to jobs in January in each department.(c) Compute the under- or overapplied overhead for each department at January 31

Answer:

2.      In the month of January following manufacturing costs: raw materials $4,000 on account, factory labour $5,000 of which $4,200 relates to factory wages payable and $800 relates to payroll taxes payable, and utilities payable $2,000. Prepare separate journal entries for each type of manufacturing cost.

Answer:

Answer 1

Req 1.
OH rate as % of DLC
			A	B	C
Overheads		780000	640000	750000
Divide: Direct labour cost	600000	100000	600000
OH rate as % of DLC		130.00%	640.00%	125.00%
Total Manufacturing Cost
			A	B	C	Total
Direct material		92000	86000	64000	242000
Direct labour cost		48000	35000	50400	133400
OH applied		62400	224000	63,000	349400
Total Manufacturing cost	202400	345000	177400	724800
Under/Over-applied Overheads
			A	B	C
Manufacturing Oh incurred	66000	60000	62100
Mfg Overheads applied	62400	224000	63000
Under (Over) applied overheads	3600	-164000	-900
Req 2.
Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Work in process inventory		4000
	Accounts payable				4000
	(for material purchased on account)
b.	Work in process inventory		5000
	Factory wages payable			4200
	Payroll tax es payable			800
	(for labour cost incurred)
c.	Work in process inventory		2000
	Accounts payable				2000
	(for utilities payable)