Question

Southwestern Fashions, Inc. which uses a job-order costing system, had two jobs in process at the start of the year: job no. 101 ($84,100) and job no. 102 ($53,300). The following information is available: a. The company applies manufacturing overhead on the basis of machine hours (based on practical capacity). Budgeted overhead and machine activity for the year were anticipated to be $824,000, and 16,000 hours, respectively. b. The company worked on four jobs during the first quarter. Direct materials used, direct labor incurred, and machine hours consumed were as follows: Job No. Direct Material Direct Labor Machine Hours 101 $21,000 $35,000 1,200 102 — 22,000 700 103 44,000 65,000 2,000 104 15,000 8,800 500 c. Manufacturing overhead during the first quarter included charges for depreciation ($32,800), indirect labor ($60,000), indirect materials used ($5,100), and other factory costs ($139,500). d. Southwestern Fashions completed job no. 101 and job no. 102. Job no. 102 was sold on account, producing a profit of $34,700 for the firm. 1. Prepare journal entries for the first quarter to record the following. (Note: Use summary entries where appropriate by combining individual job data.) (Do not round your intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a. The issuance of direct material to production and the direct labor incurred. b. The manufacturing overhead incurred during the quarter. c. The application of manufacturing overhead to production. d. The completion of jobs no. 101 and no. 102. e. The sale of job no. 102. 2. Determine the cost of the jobs still in production as of March 31. 3. Did the finished-goods inventory increase or decrease during the first quarter? By how much? 4. Was manufacturing overhead under- or overapplied for the first quarter of the year? By how much?

Answer 1

1. In the books of Southwestern Fashions Inc. :

Transaction / Event	Account Titles	Debit	Credit
		$	$
a.	Work in Process Inventory	210,800
	Raw Materials Inventory		80,000
	Factory Wages Payable		130,800
b.	Manufacturing Overhead	237,400
	Accumulated Depreciation		32,800
	Factory Wages Payable		60,000
	Raw Materials Inventory		5,100
	Accounts Payable		139,500
c.	Work in Process Inventory	226,600
	Manufacturing Overhead		226,600
d.	Finished Goods Inventory	313,250
	Work in Process Inventory		313,250
e.	Accounts Receivable	146,050
	Sales		146,050
e.	Cost of Goods Sold	111,350
	Finished Goods Inventory		111,350

2. Cost of jobs still in production as on March 31: $ 261,550 ( refer to the workings)

3. Finished goods inventory increased by $ 201,900.

4. Manufacturing overhead was under-applied by $ 10,800.

Workings:

	101	102	103	104	Total
Beginning Work in Process	84,100	53,300	0	0	137,400
Manufacturing costs incurred during the quarter
Direct Materials	21,000	0	44,000	15,000	80,000
Direct Labor	35,000	22,000	65,000	8,800	130,800
Manufacturing Overhead ( Number of MHs x $ 51.50)	61,800	36,050	103,000	25,750	226,600
Total Manufacturing Costs	117,800	58,050	212,000	49,550	437,400
Total Cost of Work in Process	201,900	111,350	212,000	49,550	574,800
Transferred Out	(201,900)	(111,350)	-	-	(313,250)
Ending Work in Process	0	0	212,000	49,550	261,550