Question

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead costs to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,320,000 in manufacturing overhead cost at an activity level of 576,000 machine-hours.

      The company spent the entire month of January working on a large order for 12,300 custom made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:

  

a. Raw materials purchased on account, $311,000.
b. Raw materials requisitioned for production, $263,000 (80% direct and 20% indirect).
c. Labor cost incurred in the factory, $159,000, (one-third direct labor and two-thirds indirect labor)
d. Depreciation recorded on factory equipment, $63,200.
e. Other manufacturing overhead costs incurred, $84,600 (credit Accounts Payable).
f. Manufacturing overhead cost was applied to production on the basis of 40,780 machine-hours actually worked during the month.

g. The completed job for 12,300 custom made machine parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consist of direct materials, direct labor, and applied overhead)

Required:

1. Prepare Journal entries to record items (a) through (f) above [ignore item (g) for the moment].

2.Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items for your journal entries to these T-accounts.

3. Prepare a journal entry for the item (g) above.

4. If 10,200 of the custom made machine parts are shipped to the customer by February, how much of the job's cost will be included in the cost of good sold for February?

Answer 1

1. Journal Entries item (a) to (f )
Date	Account Tittle	Debit	Credit
a)	Raw Material Inventory	$ 311,000
	Account Payable		$ 311,000
	To record direct Raw Material purchase
b)	Work in Process	$ 210,400
	Raw Material Inventory		$ 210,400
	To record Direct Material requisitioned
b)	Manufacturing Overhead	$    52,600
	Raw Material Inventory		$   52,600
	To record indirect Material requisitioned
b)	Work in Process	$    53,000
	Wages Payable		$   53,000
	To record direct labor cost incurred
c)	Manufacturing Overhead	$ 106,000
	Wages Payable		$ 106,000
	To record indirect labor cost incurred
d)	Manufacturing Overhead	$    63,200
	Accumulated Depreciation		$   63,200
	To record Acc. Deo. on Fact. Equipment
e)	Manufacturing Overhead	$    84,600
	Account Payable		$   84,600
	To record other factory overhead
f)	Work in Process	$ 305,850
	Manufacturing Overhead		$ 305,850
	To record MOH applied for 40,780 hours

2. Prepare T's Account
	Manufacturing overhead
		Debit			Credit
	Indirect Material	$52,600	Work in process		$ 305,850
	Indirect Labor	$106,000	Overhead under Applied		$       550
	Accumulated Depreciation	$63,200
	Other FOH Expense	$84,600
		$ 306,400			$ 306,400
	Work in Process Inventory
	Direct Raw Material Inventory	$ 210,400	Finished goods inventory		$ 569,250
	Direct Wage Payable	$    53,000
	Manufacturing overhead	$ 305,850

3. Prepare Journal entry for item (g)

g)	Finished Goods Inventory	$ 569,250
	Work in Process		$ 569,250
	To record F. Goods transferred to W/H

4. The Job's Cost to be included in cost of goods sold, for 10,200 Custom made machine part

= $569,250 10,200) 12,300

   = $472,061

We were unable to transcribe this image

We were unable to transcribe this image