Question

. Using the following information about transactions, answer the questions about Job Order Costing for Saibo Co.

The company has the beginning inventory for material 12,000 and purchase material $180,000 by cash. Beginning inventory in WIP was $15,000 only for Job No. 1.

There is no beginning inventory in FG.

For direct material $25,000 went to WIP as costs for Job No1, and $30,000 as costs for Job No 2.  Direct labor used in production for Job No.1 was $40,000, and $35,000 for the Job No.2.

Utilities incurred, $50,000, 60% due to manufacturing facilities.

Administrative expenses, $55,000 incurred.

Advertising expenses of $34,000 incurred.

There are indirect materials of $22,000, and $28,600 of indirect labor costs incurred in the job.

The company uses direct labor costs as the allocation base for manufacturing overhead costs. The total estimated manufacturing overhead costs was $196,000 and the estimated direct labor costs are $140,000. Overhead costs are applied to Job No. 1 and Job No.2.   

There is no other cost incurred for the production for Job No.1, the production was finished, and all of Job No.1 work was later sold for $225,000 on credit.  Job No. 2 has finished the production but has not sold yet.

Required: [47 pts].

1-1 Calculate the predetermined overhead allocation rate for Saibo Co? [2]

1-2 Create Seven T accounts to show the above transactions. [23]

1-3 How much overhead costs are allocated to WIP? [3].

1-4 According to information above, what is the journal entry of the completion of the production? [4]

1-5 Prepare the journal entries for the sale of Job No.1 [6]

1-6 Make adjusting entries for MOHC and MOHA accounts by using COGS. Clearly state either  over or under allocation.  Then include all necessary information to T accounts. [4].

1-7 Assuming that these are only transactions occurred in Saibo Co. in 2017. Prepare income statement based on an adjusting entry based on using CO

Answer 1

ans 1	Predetermined overhead rate=196000/140000	1.40
ans2
Raw Material Inventory
Opening Balance	12000	) Work In Process	$55,000
Accounts payable	$180,000	(25000+30000)
EndinG balance	$115,000	Manufacturing overhead	22000
Work In process
Opening Balance	15000	Finsihed Goods Inv	$250,000
Raw material	$55,000
Wages payable	$75,000
ManufacturingOverhead	$105,000
Ending balance	0
Cost of good sold
Finished Goods Inventory	$121,000
ending bal	$121,000
	Selling and Adminstrative expenses
Accounts payable (50000*.4)	109000
(55000+34000)
Finsihed Goods
Opening Balance	0	Cost of good sold	121000
Work In process	$250,000	Job 1 25000+40000+(40000*1.4)
Ending balance	$129,000
Manufacturing overhead
Accounts payable (50000*60%)	30000	work in process	$105,000
Raw material	22000	(75000*1.4)
Wages payable	$28,600
	0	end bal	$24,400
	Wages payable
		Work in process	$75,000
		Manufacturing overhead	$28,600
		end bal	$103,600
ans 3
Overhead cost allocated	$105,000
(75000*1.4)
ans 4	Dr	Cr
Finished Goods Inventory	$250,000
Work iN process iNventory		$250,000
ans 5
Accounst receivable	$225,000
Sales		$225,000
Cost of good sold	121000
Finished Goods Inventory		121000
ans 6
It is MOH overapplied
Actual	80600
Applied	$105,000
Over alloacted	$24,400
	DR	CR
Manufacturing overhead	$24,400
Cost of good sold		$24,400
ans 7
Income statement
sales	225000
Less: Adjusted COGS	$96,600
Gross profit	$128,400
Less: selling and adm expenses	109000
Net operating income	$19,400
If any doubt please comment