Question

The May 1^st balances for the following accounts are:

Raw Materials Inventory               $   6,500

Work in Process Inventory          $   5,400 (Job 1006 - $3,100; Job 1007 - $2,300)

Finished Goods Inventory             $          0

The transactions for May are as follows:

a.   Purchased materials on account, $25,000.

b.   Issued materials to production as follows:

Job 1006 - $2,700

Job 1007 - $5,500

Job 1008 - $2,300

Job 1009 - $3,800

Job 1010 - $3,000

Job 1011 - $3,700

c.Issued indirect materials to production, $5,750.

d.The company processed payroll and incurred the following costs:

a.The direct labor rate is $14.50 per hour.

Direct labor hours (DLH) incurred are as follows:

(Job 1006 – 140 DLH; Job 1007 – 56 DLH; Job 1008 – 305 DLH; Job 1009 – 75 DLH;

Job 1010 – 125 DLH; Job 1011 – 310 DLH);

b.Indirect factory labor, $30,800;

c.Selling department salary, $10,500;

d.Selling department commissions, $5, 900;

e.Administrative personnel salary, $12,400.

e.Incurred various actual costs on account:

Depreciation on factory equipment, $10,100;

Depreciation on equipment used by administrative personnel, $1,400;

Factory utilities, $1,050;

Corporate headquarters utilities, $450;

Property Taxes on factory equipment, $5,950;

Property taxes on corporate headquarters, $2,090;

Maintenance, 1,150 for corporate headquarters and $7,450 for plant.

f.The company uses normal costing. It allocates manufacturing overhead costs using budgeted rate per direct labor hour. Budgeted manufacturing overhead costs for the period were $590,000 and budgeted direct labor-hours were 10,000 DLHs. Calculate the predetermined overhead rate and journalize the applied manufacturing overhead cost for the period (Show your calculations).

g.Completed Jobs #1006, 1007, and 1011. (Hint: you will need to determine the cost of each job – see schedule of job cost.)

h.Sold Jobs #1006 and #1007. Customers were billed $25,000 for Job #1006 and $44,400 for Job #1007.

Requirement:

1.Record the May transactions in the following General Journal.

Answer 1

Transaction	Account Titles and Explanation	Debit	Credit
a.	Raw materials inventory	25000
	Accounts payable		25000
	(To record raw materials purchased on account)
b.	Work in process inventory	21000
	Raw Materials inventory		21000
	(To record direct materials issued to production)
c.	Manufacturing overhead	5750
	Raw materials inventory		5750
	(To record indirect materials issued to production)
d.	Work in process inventory (1011 DLH x $14.50)	14659.5
	Manufacturing overhead	30800
	Selling and administrative salaries expense (10500 + 12400)	22900
	Sales commission expense	5900
	Salaries and wages payable		74259.5
	(To record salaries and wages incurred)
e.	Manufacturing overhead (10100 + 1050 + 5950 + 7450)	24550
	Administrative expense (1400 + 450 + 2090 + 1150)	5090
	Accumulated depreciation-equipment (10100 + 1400)		11500
	Accounts payable (1050 + 450 + 5950 + 7450 + 2090 + 1150)		18140
	(To record various costs incurred)
f.	Work in process inventory	59649
	Manufacturing overhead (1011 DLH x $59)		59649
	(To record assignment of overhead)
g.	Finished goods inventory	54491
	Work in process inventory		54491
	(To record jobs completed and transferred)
h.	Cost of goods sold	28006
	Finished goods inventory		28006
	(To record cost of sales)
	Accounts receivable (25000 + 44400)	69400
	Sales revenue		69400
	(To record cash sales / sales on account)

Workings:

Predetermined overhead rate = $590000/10000 DLH = $59 per DLH

	Jobs
	1006	1007	1008	1009	1010	1011
Beg. Work in process	3100	2300
Direct materials	2700	5500	2300	3800	3000	3700
Direct labor	2030	812	4422.5	1087.5	1812.5	4495
	(140 x $14.5)	(56 x $14.5)	(305 x $14.5)	(75 x $14.5)	(125 x $14.5)	(310 x $14.5)
Manufacturing overheads	8260	3304	17995	4425	7375	18290
	(140 x $59)	(56 x $59)	(305 x $59)	(75 x $59)	(125 x $59)	(310 x $59)
Total job cost	16090	11916	24717.5	9312.5	12187.5	26485