Question

Pincus Corporation, which uses a job-costing system, had two jobs in process at the start of 20x1: job no. 59 ($95,000) and job no. 60 ($39,500). The following information is available:

• The company applies manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year were anticipated to be $720,000 and 20,000 hours, respectively.

• The company worked on three jobs during the first quarter. Direct materials used, direct labor incurred, and machine hours consumed were:

Job No.

Direct Materials

Direct Labor

Machine Hours

59

$18,000

$45,000

900

60

---

25,000

600

61

37,000

35,000

1,200

• Manufacturing overhead during the first quarter included charges for depreciation ($20,000), indirect labor ($50,000), indirect materials used ($4,000), and other factory costs ($108,700).

• Pincus completed job no. 59 and job no. 60. Job no. 59 was sold for cash, producing a gross profit of $24,600 for the firm.

Required:

A. Determine the company's predetermined overhead application rate.

B. Prepare journal entries as of March 31 to record the following. (Note: Use summary entries where appropriate by combining individual job data.)

1. The issuance of direct material to production, and the direct labor incurred.

2. The manufacturing overhead incurred during the quarter.

3. The application of manufacturing overhead to production.

4. The completion of job no. 59 and no. 60.

5. The sale of job no. 59.

Answer 1

A)

predetermined overhead application rate= Budgeted overhead/Budgeted machine Hours

                                                                              = 720000/20000

                                                                                = 36

B)

Job No.	Direct material	Direct Labor cost	Machine Hours
59	18000	45000	900
60	--	25000	600
61	37000	35000	1200
Total Machine Hours			2700

MNUFAXTURING OVERHEAD :

Depreciation                                                20000

Indirect Labor                                             50000

Indirect Material                                         4000

Other Factory Cost                                    108700

Total manufacturing Overhead:         182700 $

B)

journal entries as of March 31 of Pincus Corporation

1. The issuance of direct material to production, and the direct labor incurred

The issuance of direct material to production

Particulars	Job 59	Job 60	Job 61
Work in process inventory A/c Dr	18000	-	37000
T0 Raw materials inventory	18000	-	37000

Direct Labor Incurred

Particulars	Job 59	Job 60	Job 61
Labor cost A/c Dr	45000	25000	35000
To Wages payable	45000	25000	35000

Particulars	Job 59	Job 60	Job 61
Work in process inventory A/c Dr	45000	25000	35000
To Labor cost A/c	45000	25000	35000

2)

MNUFAXTURING OVERHEAD A/c Dr    182700

               To Depreciation                                                20000

To Indirect Labor                                             50000

To Indirect Material                                         4000

TO Other Factory Cost                                    108700         

Total manufacturing Overhead incurred during quarter:         182700 $

3) The application of manufacturing overhead to production:

For Job 59:( Total Manufacturing O.H/total Machine Hours)* Job 59 Machine Hours

                    =(182700/2700)*900

                    =60900

For Job 60 =(182700/2700)*600

                      =40600

For Job 61: =(182700/2700)*1200

                       =81200

Particulars	Job 59	Job 60	Job 61
Work in process inventory A/c Dr	60900	40600	81200
To MNUFAXTURING OVERHEAD A/c	60900	40600	81200

4) The completion of job no. 59 and no. 60.

Particulars	Job 59	Job 60
Finished goods inventory A/c Dr	123900	65600
To     Work in process inventory A/c	123900(18000+45000+60900)	65600(0+25000+40600)