Question

Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $ 22,000, direct labor $ 13,200, and manufacturing overhead $ 17,600. As of January 1, Job No. 49 had been completed at a cost of $ 99,000 and was part of finished goods inventory. There was a $ 16,500 balance in the Raw Materials Inventory account.

During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $ 134,200 and $173,800, respectively. The following additional events occurred during the month.

1.		Purchased additional raw materials of $ 99,000 on account.
2.		Incurred factory labor costs of $ 77,000. Of this amount $ 17,600 related to employer payroll taxes.
3.		Incurred manufacturing overhead costs as follows: indirect materials $ 18,700; indirect labor $ 22,000; depreciation expense on equipment $ 13,200; and various other manufacturing overhead costs on account $ 17,600.
4.		Assigned direct materials and direct labor to jobs as follows.

Job No.		Direct Materials		Direct Labor
50		$ 11,000		$ 5,500
51		42,900		27,500
52		33,000		22,000

Calculate the predetermined overhead rate for 2017, assuming Lott Company estimates total manufacturing overhead costs of $ 924,000, direct labor costs of $ 770,000, and direct labor hours of  22,000 for the year. (Round answer to the nearest whole percent, e.g. 25%.)

Predetermined overhead rate

%

eTextbook and Media

List of Accounts

Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet for Job No. 50.

Job No. 50
Date		Direct Materials		Direct Labor		Manufacturing Overhead
Beg.		$		$		$
Jan.
		$		$		$
Cost of completed job
Direct materials						$
Direct labor
Manufacturing overhead
Total cost						$

Job No. 51
Date		Direct Materials		Direct Labor		Manufacturing Overhead
Jan.		$		$		$
		$		$		$
Cost of completed job
Direct materials						$
Direct labor
Manufacturing overhead
Total cost						$

Job No. 52
Date		Direct Materials		Direct Labor		Manufacturing Overhead
Jan.		$		$		$

eTextbook and Media

List of Accounts

Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.	Account Titles and Explanation	Debit	Credit
(1)
(2)
(3)

eTextbook and Media

List of Accounts

Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in (a). (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.	Account Titles and Explanation	Debit	Credit
(1)
(2)
(3)

eTextbook and Media

List of Accounts

Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry to record the completion of any job(s) during the month. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

eTextbook and Media

List of Accounts

Prepare the journal entries to record the sale of any job(s) during the month. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.	Account Titles and Explanation	Debit	Credit
(1)
	(To record sale of jobs)
(2)
	(To record cost of jobs)

eTextbook and Media

List of Accounts

What is the balance in the Finished Goods Inventory account at the end of the month? What does this balance consist of?

Finished Goods Inventory

$

Job No. 50Job No. 51Job No. 52Jobs 50 and 51Jobs 51 and 52Jobs 50 and 52

eTextbook and Media

List of Accounts

What is the amount of over- or underapplied overhead?

Manufacturing Overhead

$

OverappliedUnderapplied

eTextbook and Media

List of Accounts

Answer 1

Calculate the predetermined overhead rate for 2017, assuming Lott Company estimates total manufacturing overhead costs of $ 924,000, direct labor costs of $ 770,000, and direct labor hours of  22,000 for the year

$924,000÷ $770,000 direct labor costs =120% of direct labor costs

Calculate the predetermined overhead rate for 2017, assuming Lott Company estimates total manufacturing overhead costs of $ 924,000, direct labor costs of $ 770,000, and direct labor hours of  22,000 for the year. (Round answer to the nearest whole percent, e.g. 25%.)

Job No. 50
	Direct Materials	Direct Labor	Manufacturing Overhead
Beg	22000	13200	17600
	11,000	5,500	6600
	33,000	18,700	24200
	Cost of completed job
	Direct materials	33,000
	Direct labor	18,700
	Manufacturing overhead	24200
	Total cost	75,900

ob No. 51
Date	Direct Materials	Direct Labor	Manufacturing Overhead
Jan.	42900	27500	33000
	42900	27500	33000
Cost of completed job
Direct materials	42900
Direct labor	27500
Manufacturing overhead	33000
Total cost	103400

Job No. 52
Date	Direct Materials	Direct Labor	Manufacturing Overhead
Jan.	33000	22000	26400

Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

	DR	CR
Raw Materials Inventory	99000
Accounts Payable		99000
Factory Labor	77000
Factory Wages Payable		59400
Employer Payroll Taxes Payable		17600
Manufacturing Overhead	71500
Accounts Payable		17600
Accumulated Depreciation		13200
Raw Materials Inventory		18700
Factory Labor		22000

Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in (a)

	DR	CR
Work in Process Inventory	86900
Raw Materials Inventory		86900
Work in Process Inventory	55000
Factory Labor		55000
Work in Process Inventory	66000
Manufacturing Overhead		66000

Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry to record the completion of any job(s) during the month. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

	DR	CR
Finished Goods Inventory	1,79,300
Work in Process Inventory		1,79,300

Prepare the journal entries to record the sale of any job(s) during the month. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

	DR	CR
Cost of Goods Sold	1,74,900
Finished Goods Inventory		1,74,900

What is the balance in the Finished Goods Inventory account at the end of the month? What does this balance consist of?

Finished Goods Inventory
JOB 51	103400

What is the amount of over- or underapplied overhead?

Overhead Applied =71500-66000=5500 Under Applied