Question

Authentic Assessment for Module 4: Job Costing

Please go to the Excel Workbook you created for the Module 2 Authentic Assessment. If you need to, create a new tab and name it “Module 4 Entries” – this is where you will provide in good form the journal entries for the assessment and determine job costs. Use the number of the item instead of a date and do include a brief description. Your journal entries need to be formatted and indented properly. Names of accounts need to be properly spelled and use consistent capitalization.

Please note: When you make your journal entries, because there are multiple departments, there are multiple accounts and you need to specify which department and job you are using. So, you might have an entry that looks like:

            WIP Inventory – Assembly (Job #1)

                         Raw Materials Inventory

Or

            WIP Inventory – Parts Fabrication (Job #3)

                        Manufacturing Overhead Control – Parts Fabrication

                       

You may combine the entries by department (so 3 debit lines for WIP Inventory -Assembly and 1 credit line for Raw Materials Inventory in the 2^nd entry in the assignment). We only distinguish between jobs while we are still adding costs to them…so you do not have separate entries inside of FG (No Finished Goods – Job #1, for example).

Please show any calculations you needed to make for the entries off to the side, and show your calculations for the cost of the two unfinished jobs below the entries, in a neat table.

Lenoir Comprehensive Building Solutions (LCBS) builds portable buildings to clients’ specifications. The firm has two departments: Parts Fabrication and Assembly. The Parts Fabrication Department designs and cuts the major components of the building and is highly automated. The Assembly Department assembles and installs the components and this department is highly labor intensive. The Assembly Department begins work on the buildings as soon as the floor components are available from the Parts Fabrication Department.

In its first month of operations (March), LCBS obtained contracts for three buildings:

            Job 1: a 20- by 40-foot storage building

            Job 2: a 35- by 35-foot commercial building

            Job 3: a 30- by 40-foot portable classroom

LCBS bills its customers on a cost-plus bases, with profit set equal to 25% of costs. The firm uses a job order costing system based on normal costs. Overhead is applied in Parts Fabrication at a predetermined rate of $100 per machine hour (MH). In the Assembly Department, overhead is applied at a predetermined rate of $10 per direct labor hour (DLH). The following significant transactions occurred in March.

#1 Direct material was purchased on account: $80,000

#2 Direct material was issued to the Parts Fabrication Department for use in the three jobs: Job #1, $8,000; Job #2, $14,000; and Job #3, $45,000. Direct material was issued to the Assembly Department: Job #1, $500; Job #2, 1,200; and Job #3, $6,600.

#3 Time sheets and payroll summaries indicated that the following direct labor costs were incurred:

	Parts Fabrication Department	Assembly Department
Job #1	$1,000	$2,400
Job #2	3,000	3,500
Job #3	5,000	9,500

#4 The following indirect costs were incurred in each department:

	Parts Fabrication Department	Assembly Department
Labor	$4,200	$4,500
Utilities/Fuel	5,900	2,300
Depreciation	10,300	3,600

The labor and utilities/fuel costs were accrued at the time of the journal entry.

NOTE: LCBS uses a single Manufacturing Overhead Control Account for each department.

#5 Overhead was applied based on the predetermined rates in effect in each department. The Parts Fabrication Department had 200 MHs (20 MHs on Job #1, 35 MHs on Job #2, and 145 MHs on Job #3), and the Assembly Department worked 950 DLHs (40 DLHs on Job #1, 110 DLHs on Job #2, and 800 DLHs on Job #3) for the month.

#6 Job #1 was completed and sold for cash in the amount of the cost-plus contract. At month-end, Jobs #2 and #3 were only partially complete. For simplicity, move Job #1 out of both departments of WIP to FG in one entry. Do not worry about moving Jobs #2 and #3 between WIP departments.

#7 Any underapplied or overapplied overhead at month-end is considered immaterial and is assigned to Cost of Goods Sold.

Required:

1. Record the journal entries for transactions 1-7.
2. As of the end of March, determine the total cost assigned to Jobs #2 and #3.

Answer 1

a) Journal Entries:
Date	Acc Titles	Debit $	Credit $
1	Direct Material	80000
	Acc Payable		80000
	(DM purchased on credit)
2	WIP- Fabrication	67000
	WIP- Assembly	8300
	Direct Material		75300
	(DM applied to the production)
3	WIP- Fabrication	9000
	WIP- Assembly	15400
	Payroll Exp.		24400
	(DL applied to the production)
4	Manufacturing Overhead	30800
	Payroll		8700
	Utilities/Fuel		8200
	Acc Dep.		13900
	(indirect actual costs put-in)
5	WIP- Fabrication	20000		200*100
	WIP- Assembly	9500		950*10
	Manufacturing Overhead		29500
	(OH applied to the production)
6	Finished Goods	14300
	WIP- Fabrication		11000	8000+1000+(20*100)
	WIP- Assembly		3300	500+2400+(40*10)
	(Job 1 finished & transferred to FG)
	Cash	17875		14300*1.25
	Sales revenue		17875
	(Sale of Job 1)
	COGS	14300
	Finished Goods		14300
	(Cost of sales booked)
7	COGS	1300		(30800-29500)
	Manufacturing Overhead		1300
	(under-applied OH closed to COGS)
b) Total costs assigned to Jobs 2 & 3:
	Job 2	Job 3
DM	15200	51600
DL	6500	14500
OH	18000	9100
Total Costs assigned	39700	75200