Question

Step 1:

You work for Thunderduck Custom Tables Inc. This is the first month of operations. The company designs and manufactures specialty tables. Each table is specially customized for the customer. This month, you have been asked to develop and manufacture two new tables for customers. You will design and build the tables. This is a no nail, no screw, and no glue manufacturing ( no indirect materials used). You will be keeping track of the costs incurred to manufacture the tables using Job #1 Cost Sheet and Job #2 Cost Sheet.

The cost of the direct materials that can be used to manufacture the table are as follows. These cost are on a per unit basis.

  Table Top $1,800.00

  Table Leg   $550.00

  Drawer   $380.00

The company uses a job order costing system and applies manufacturing overhead to jobs based on direct labor hours.   

The company estimates that there will be 12 direct labor hours worked during the month.

     

The estimated manufacturing overhead cost for the month is:  

a.Factory supervisor salary per month $4,000.00

b.Rent for the factory per month $1,400.00

c.Depreciation of factory equipment per month $600.00

  Total Estimated manufacturing overhead $6,000.00

What is the predetermined manufacturing overhead rate?   

  

Step 2:

The first order you received was to manufacture a table using a table top and four legs. This is your Job #1.

Step 3:

The customer that has ordered Job #2, wants a table that is the same as Job #1, but wants to also add a drawer to the table.

Step 4:

The following is a list of transactions that need to be recorded for the company for activity in the month of December. Record those in the "General Journal" tab of the excel file using the proper format. Please use the following accounts: Accounts Receivables, Raw materials, Work in process, Finished goods, Accumulated depreciation, Accounts payable, Salaries and wages payable, Sales revenue, Manufacturing overhead, Cost of goods sold, Salaries and wages expense, Advertising expenses, and Depreciation expense.

1-Dec Raw Materials purchased on account, $18,000.

5-Dec All Raw Materials needed for Job #1 were requisitioned from the material storage for use during the month. Assume all materials are direct. (After you journalize this entry please enter the information into Job #1 Cost Sheet)

10-Dec The following employee costs were incurred but not paid during the month:

There are three assembly employees that spend 2 hours each, $20 per hour to make the table for Job #1. (After you journalize this entry please enter the information into Job #1 Cost Sheet)

Salary for supervisor of the factory $4,500.

Administrative Salary $2,000.

15-Dec All Raw Materials needed for Job #2 were requisitioned from the material storage for use during the month. Assume all materials are direct. (After you journalize this entry please enter the information into Job #2 Cost Sheet)

16-Dec Rent for the month of December for the factory building incurred but not paid $1,400.

17-Dec Advertising costs incurred but not paid for the month was $1,600.

20-Dec Depreciation for the month of December was recorded on equipment was $750 ($150 for equipment used in the factory and the remainder for equipment used in selling and administrative activities).

22-Dec Manufacturing overhead cost was applied based on direct labor hours to Job #1 based on the POHR determined on the "Job Cost Sheet". (After you journalize this entry please enter the information into Job #1 Cost Sheet)

26-Dec Job #1 was completed and transferred to Finished Goods during the month.

28-Dec The completed table from Job #1 was sold on account to the customer for $23,000 during the month. (Hint: Make sure to account for the cost of the table that was sold using the cost from the job cost sheet.)

31-Dec Direct labor cost incurred but not paid for three employees to start manufacturing Job #2. The employees only worked one hour each, three hours total, $20 per hour during the month and they did not complete their work on the job. (After you journalize this entry please enter the information into Job #2 Cost Sheet)

31-Dec Manufacturing overhead cost was applied based on direct labor hours to Job #2 based on the POHR. Only three direct labor hours were worked on Job #2 during the month. (After you journalize this entry please enter the information into Job #2 Cost Sheet)

31-Dec Any underapplied or overapplied overhead for the month was closed out to Cost of Goods Sold.

Answer 1

Step 1 Determination of the predetermined Manufacturing overhead rate :-
	Predetermined Manufacturing Overhead Rate =	Total estimated manufacturing overhead cost	=	$6,000	=	$ 500	per direct labour hour
	Total estimated direct labor hours	12

Step 2 The first order you received was to manufacture a table using a table top and four legs. This is your Job #1 :-
Job #1 Cost Sheet
				Total
	Direct Materials
	Table Top	1800
	Table Leg	550		2350
	Direct Labor	2 hours* 3 employees= 6 hours *$20per hour		120
	Manufacturing Overhead	$500* 6 hours		3000
	Total					5470

Step 3 The customer that has ordered Job #2, wants a table that is the same as Job #1, but wants to also add a drawer to the table. :-
Job #2 Cost Sheet
				Total
	Direct Materials
	Table Top	1800
	Table Leg	550
	Drawer	380		2730
	Direct Labor	1 hours* 3 employees= 3 hours *$20 per hour		60
	Manufacturing Overhead	$500* 3 hours		1500
	Total					4290

Step 4 Journal entries
Sr. No.	Particulars	Debit		Credit
1-Dec	Raw Materials A/c	$18000
	To Accounts payable A/c			$18000
	(Being Raw materials purchased on account)
5-Dec	Work in Process A/c	$ 2350
	To Raw Materials A/c			$ 2350
	(Being Raw materials issued for use in Job #1)
10-Dec	Work in Process A/c      (2 hours* 3 employees*$ 20 per hour)	$120
	Manufacturing Overheads A/c                                                         Dr.	$4500
	Selling & Administration Overheads A/c                                          Dr.	$2,000
	To Salaries and wages payable A/c			6620
	(Being employee cost incurred)
15-Dec	Work in Process A/c	$2730
	To Raw Materials A/c			$2730
	(Being Raw materials issued for use in Job #2)
16-Dec	Manufacturing Overheads A/c	$1,400
	To Rent Payable A/c			$1,400
	(Being Rent for the factory building incurred )
17-Dec	Selling & Administration Overheads A/c	$1,600
	To Advertising Expenses Payable A/c			$1,600
	(Being Advertising Expenses incurred)
20-Dec	Manufacturing Overheads A/c	$150
	Selling & Administration Overheads A/c                                                  Dr.	$600
	To Accumulated depreciation A/c			$750
	(Being depreciation charged on factory and office equipments)
22-Dec	Work in Process A/c                                                                       Dr.	3,000
	To Manufacturing Overheads A/c			$3,000
	(Being Manufacturing Overheads charged to job #1 @ $500 per direct labour) (500 * 6)
26-Dec	Finished Goods A/c                                                                        Dr.	$ 5470
	To Work in Process A/c			$ 5470
	(Being job #1 completed)
28-Dec	Cost of goods sold A/c                                                                   Dr.	$ 5470
	To Finished Goods A/c			$ 5470
	(Being goods sold transferred)
28-Dec	Account Receivable A/c                                                                                        Dr.	$23,000
	To Sales Revenue A/c			$ 23,000
	(Being goods sold on account)
31-Dec	Work in Process A/c     (1 hour* 3 employees*$20 per hour)    Dr.	$60
	To Salaries and wages payable A/c			$ 60
	(Being direct labor cost incurred)
31-Dec	Work in Process A/c                                                                     Dr.	$1500
	To Manufacturing Overheads A/c			$1500
	(Being Manufacturing Overheads charged to job #2 @ $500 per direct labour) (500 * 3)
31-Dec	Cost of goods sold A/c                                                                   Dr.	$     1,550
	To Manufacturing Overheads A/c (4500+1400+150)-500(6+3)			$1550
	(Being underapplied overheads charged