Question

Purl of Great Price Company

Maria Young is the sole stockholder of Purl of Great Price Company (POGP Company), which produces high-end knitted sweaters and sweater vests for sale to retail outlets. The company started in January of the current year, and employs three knitters (each of whom work 40 hours per week) and one office manager/knitting supervisor (this employee works 20 hours per week as office manager, and 20 hours per week as knitting supervisor). All wages are paid in cash at the end of each month.

Each knitter has a knitting machine that is used about 2/3 of the knitter’s time, the rest of the knitter’s time being involved in hand knitting and piecing together the garments. The company also has a packaging machine used to wrap the garments in plastic for shipping, which is operated by the office manager/knitting supervisor approximately 5 hours per week.

The knitting machines were purchased on January 1 of the current year, and cost $2,400 each, with an anticipated useful life of 10 years and no salvage value. The packaging machine was purchased on the same date and cost $4,800, with the same anticipated useful life and salvage value.

Nov. 30 Trial Balance

POGP Company
Trial Balance
November 30, 20Y8

Account TitleDebitCredit

Cash20,000

Accounts Receivable1,000

Supplies200

Materials5,000

Work in Process5,404

Equipment12,000

Accumulated Depreciation-Equipment825

Accounts Payable150

Common Stock10,000

Retained Earnings12,000

Dividends18,096

Sales307,500

Cost of Goods Sold255,040

Factory Overhead15

Wages Expense13,750

330,490330,490

Predetermined Factory Overhead Rate

Since the company is more reliant on labor than machines, Maria decides to use direct labor hours (DLH) as the activity base for her predetermined factory overhead rate, rather than machine hours (MH).

Estimated Selected Amounts for the Year

Estimated depreciation on equipment$1,200

Estimated total Office Manager/Knitting Supervisor wages$36,000

Estimated office utilities$5,000

Estimated factory utilities$4,800

Estimated factory rent$12,000

Activity Base Data

Estimated number of DLH for the year6,250

Estimated number of MH for the year4,375

Compute the predetermined factory overhead rate for the current year.

$5.76 per DLH

Feedback

Review the definitions of items that are included in factory overhead for the computation of estimated total factory overhead costs.

Materials RequisitionDate: Dec. 10

Req. No. 12255Job No. 83

DescriptionQty. IssuedUnit PriceAmount

Yarn type B600 skeins$5$3,000

Total issued$3,000

Time TicketNo. 1255Name:Susan Blake

Work Description:Knitting/piecing

DatesJob No.Hours WorkedUnit PriceAmount

12/01-12/1562       65       $15       $975

12/16-12/3183       103       15       1,545

Total Cost$2,520

Time TicketNo. 2274Name:Josh Porter

Work Description:Knitting/piecing

DatesJob No.Hours WorkedUnit PriceAmount

12/01-12/156275$15$1,125

12/16-12/318388151,320

Total Cost$2,445

Time TicketNo. 3923Name:Mary Jones

Work Description:Knitting/piecing

DatesJob No.Hours WorkedUnit PriceAmount

12/01-12/1562       60       $15$900

12/16-12/3183       109       151,635

Total Cost$2,535

Job Cost Sheets

On December 10, POGP Company receives an order for 200 sweater vests and assigns Job 83 to the order. Review the Materials Requisition table to add the materials to the Job Cost Sheet for Job 83.

On December 15, review the Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 62 for the period December 1 through December 15.

On December 31, the last work day of the year for the knitters, review Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 83 for the period December 16 through December 31.

If there is no amount or an amount is zero, enter "0". If required, round your answers to the nearest cent.

Job 62100 units:Sweaters

Direct MaterialsDirect LaborFactory OverheadTotal

Balance Dec. 1$5,000$300$104$5,404

Dec. 15

Total Cost$$$$

Unit Cost$

Job 83200 units:Sweater vests

Direct MaterialsDirect LaborFactory OverheadTotal Job Cost

Balance Dec. 1$0$0$0$0

Dec. 10

Dec. 31

Total Cost$$$$

Feedback

Recall that the factory overhead is applied for this company using direct labor hours (DLH).

Journal

On December 10, POGP Company receives an order for 200 sweater vests and assigns Job 83 to the order. Review the Materials Requisition table to journalize the entry to record the addition of the materials to Work in Process. If an amount box does not require an entry, leave it blank.

Dec. 10Work in Process

Materials

Feedback

Think about the flow of costs incurred to do a job and the accounts affected by sales to customers.

On December 15, review the Time Ticket tables to journalize the entry to record the addition of direct labor to Work in Process for the period December 1 through December 15. If an amount box does not require an entry, leave it blank.

Dec. 15Work in Process

Wages Payable

Feedback

Partially correct

On December 15, review the Time Ticket tables to journalize the entry to record the addition of factory overhead to Work in Process for the period December 1 through December 15. If an amount box does not require an entry, leave it blank.

Dec. 15Work in Process

Factory Overhead

Feedback

Partially correct

On December 21, Job 62 is completed. Review the Job Cost Sheets and your journal entries. Journalize the entry to move the associated costs to the finished goods account. If an amount box does not require an entry, leave it blank.

Dec. 21Finished Goods

Work in Process

Feedback

Partially correct

On December 22, 75 of the 100 sweaters from Job 62 are sold on account for $125 each. Journalize the following transactions:

a. The entry to record the sale.

b. The entry to record the transfer of costs from Finished Goods to Cost of Goods Sold.

If an amount box does not require an entry, leave it blank.

Dec. 22Accounts Receivable

Sales

Dec. 22Cost of Goods Sold

Finished Goods

Answer 1

	Estimated depreciation on equipment	$1,200
	Estimated total Office Manager/Knitting Supervisor wages (30000*20/40)	$15,000
	Estimated factory utilities	$4,800
	Estimated factory rent	$18,000
	Total estimated factory overhead	$39,000
	Estimated number of DLH for the year	5,000
	Ans 1 Predetermined factory overhead rate	7.8
	39000/5000
	Job 62	100 units:	Sweaters
		Direct Materials	Direct Labor	Factory Overhead	Total
	Balance Dec. 1	$5,000	$300	$104	$5,404
	Dec. 15		3000	1560	4560
			975+1125+900	(65+75+60)*7.8
	Total Cost	$5,000	$3,300	$1,664	$9,964
				Unit Cost
	Job 83	200 units:	Sweater vests
		Direct Materials	Direct Labor	Factory Overhead	Total Job Cost
	Balance Dec. 1	$0	$0	$0	$0
	Dec. 10	0	0	0	0
	Dec. 31	3500	4500	2340	10340
	Total Cos		1545+1320+1635	(103+88+109)*7.8
Date	Accounts Title	Dr	Cr
10-Dec	Work In process	3500
	Material		3500
2 B) added in job cost sheet see above
3	Work In process	3000
Dec1-Dec15	Wages Expenses		3000
b	Work In process	1560
	Factory Overhead		1560
c) added to cost sheet
4	Finished Goods	$9,964
21-Dec	Work In process		$9,964
5	Accounts Receivable (75*125)	9375
22-Dec	Sales		9375
	Cost of good sold (9964/100*75)	$7,473
	Finished Goods		$7,473
6
Dec 16-31	Work In process	4500
a	Wages Expenses		4500
b	Work In process	2340
	Factory Overhead		2340
c) added to cost sheet
7	Factory Overhead	60
	Accumulated depreciation-equipment (2400+4800)/120*1	60
b	Wage expenses (7500+(12500/2))	8750
	Factory overhead (30000/12*20/40)	1250
	Cash		10000
	(7500+ supervisor salary (30000/12=2500)= 10000
	Wages
Job 62	(65+75+60)*15	3000
Job 83	(103+88+109)*15	4500
c	Factory Overhead	1500
	Cash		1500
d	Factory Overhead	1275
	Cash		1500
	Factory overhead Underapplied
	Actual (1500+1275+1250)	4025
	Applied overhead (1560+2340)+15	3915
	Underapplied	110
	see below working
	T account Factory Overhead
	Applied	4025	Opening bal	15
			WIP	3900
	ending balance	110
8	Cost of good sold	110
	Factory Overhead		110
9
A.	Materials (5000-3500)	1500
B.	Work in Process	10340
C.	Finished Goods (9964-7473)	2491
D.	Factory Overhead	0
E.	Cost of Goods Sold (7473+110)	7583

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