Question

Crafty Ceramics makes custom ceramic tiles. During March Crafty worked on 25 jobs and purchased $25,600 of raw materials on the account, paid direct labor cost of $31,000, and incurred manufacturing overhead costs of $26,530. Crafty applies overhead at a rate of 80% of direct labor cost.

Job #231, one of the 25 jobs, started and completed during the month. The company’s records show the following direct materials were requisitioned for Job #231: White tiles: 1,000 units at $1.00 per unit, and High Gloss Glaze: 2 quarts at $2.00 per quart. Labor time records show Jenny Jones worked 10 hours at $20 per hour on Job #231.       

Required:

      A) Make journal entries to record the material requisition for Job #231.

• Make journal entry to record the labor cost for Job #231.
• Make journal entry to apply [i.e., to allocate] the manufacturing overhead to Job #231.

D) Given the total production costs for this month over all the jobs, make journal entries:

       (1) to apply the total manufacturing overhead to all 25 jobs, and

       (2) to close under- [or over-] applied overhead to the firm’s cost of goods sold account.

Answer 1

Crafty Ceramics
Journal entries
Event	General Journal	Debit	Credit
	Raw material inventory	25,600
	Account payable		25,600
	(To record Purchase of raw material inventory
A	Work in progress inventory	1,004
	Raw material inventory		1,004
	(To record Issue of raw material inventory into production process.) ((1000 units * $1) + (2 Quarts * $ 2))
	Wages Payable	31,000
	Cash		31,000
	(To record direct labor Consumed.)
B	Work in progress inventory	200
	Wages Payable		200
	(To record direct labor Consumed.) (10 hours *$20)
C	Work in progress inventory	160
	Manufacture overhead		160
	(To record Applied overhead to Jobs 231.) (200*80%)

Journal entries
Event	General Journal	Debit	Credit
D 1	Work in progress inventory	24,800
	Manufacture overhead		24,800
	(To record applies the total manufacturing overhead to all 25 jobs.) (31000*80%)
D 2	Cost of goods sold	1,730
	Manufacture overhead		1730
	(To record under applied of manufacture overhead.)

Actual Manufacture overhead incurred	$        26,530
Less: Manufacture overhead Applied	$        24,800
Under (Over) applied of overhead	$          1,730