Question

Waterways has two major public-park projects to provide with comprehensive irrigation in one of its service locations this month. Job J57 and Job K52 involve 15 acres of landscaped terrain, which will require special-order, sprinkler heads to meet the specifications of the project. Using a job cost system to produce these parts, the following events occurred during December. Raw materials were requisitioned from the company’s inventory on December 2 for $5,016; on December 8 for $1,050; and on December 14 for $3,444. In each instance, two-thirds (2/3) of these materials were for J57 and the rest for K52. Six time tickets were turned in for these two projects for a total amount of 18 hours of work. All the workers were paid $15.5 per hour. The time tickets were dated December 3, December 9, and December 15. On each of those days, 6 labor hours were spent on these jobs, two-thirds (2/3) for J57 and the rest for K52. The predetermined overhead rate is based on machine hours. The expected machine hour use for the year is 2,093 hours, and the anticipated overhead costs are $837,200 for the year. The machines were used by workers on projects K52 and J57 on December 3, 9, and 15. Six machine hours were used for project K52 (2 each day), and 8.5 machine hours were used for project J57 (2.5 the first day and 3 each of the other days). Both of these special orders were completed on December 15, producing 200 sprinkler heads for J57 and 100 sprinkler heads for K52. Additional job order activities during this period included: Dec. 1 Purchased raw materials from Durbin Supply Company on account for $52,700. Dec. 2 Issued $40,000 of direct materials from the company’s inventory to jobs other than K52 and J57 and $3,000 of indirect materials. Dec. 12 Paid Waterways’ factory salaries and wages for $64,900. Dec. 13 Paid the factory’s water bill of $8,900. Dec. 18 Transferred $50,500 of costs from other completed jobs to finished goods. Dec. 21 Paid the factory’s electric bill of $12,100 for Waterways’ factory. Dec. 31 Made adjusting entries forth factory that included accrued property taxes of $12,100, prepaid insurance of $8,700, and accumulated depreciation of $16,000.

Set up the job cost sheets for Job No. J57 and Job No. K52. Determine the total cost for each manufacturing special order for these jobs. (Round unit costs to 2 decimal places, e.g. 12.25.)

Journalize the activities from these job cost sheets in the general journal. Also, journalize the other costs that occurred during this period. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. Round answers to 0 decimal places, e.g. 5,275.)

Date

Account Titles and Explanation

Debit

Credit

Assuming that Manufacturing Overhead has a debit balance of $3,600, determine whether overhead has been under/over applied and make the adjusting entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Job cost sheets:
					Job no.J57	Job no.K52
Material cost					6340	3170
(Total material cost=5016+1050+3444=$ 9510)					(9510*2/3)	(9510*1/3)
Labor cost					186	93
					(18*2/3*15.5)	(18*1/3*15.5)
Overhead cost				(Note:1)	2424	3434
Total cost				a	8950	6697
Number of sprinkler heads				b	200	100
Unit cost				a/b	44.75	66.97
Note:1
Predetermined overhead rate=Anticipated overhead cost/Expected machine hours=837200/2093=$ 400 per machine hour
Overhead cost allocated to Job=Machine hours for the job*Predetermined overhead rate
J57:
Overhead cost allocated to Job=6*400=$ 2400
K52:
Overhead cost allocated to Job=8.5*400=$ 3400
Journal entries related to jobs J57 and K52:
Date	Account titles and explanation					Debit	Credit
12/2.	Work in process inventory					5016
	Raw materials inventory						5016
	(To assign material to Jobs)
12/3.	Work in process inventory				(6*15.5)	93
	Salaries and wages expense						93
	(To assign labor to jobs)
12/3.	Work in process inventory				(2+2.5)*400	1800
	Manufacturing overhead						1800
	(To assign overhead to jobs)
12/8.	Work in process inventory					1050
	Raw materials inventory						1050
	(To assign material to Jobs)
12/9.	Work in process inventory				(6*15.5)	93
	Salaries and wages expense						93
	(To assign labor to jobs)
12/9.	Work in process inventory				(2+3)*400	2000
	Manufacturing overhead						2000
	(To assign overhead to jobs)
12/14.	Work in process inventory					3444
	Raw materials inventory						3444
	(To assign material to Jobs)
12/15.	Work in process inventory				(6*15.5)	93
	Salaries and wages expense						93
	(To assign labor to jobs)
12/15.	Work in process inventory				(2+3)*400	2000
	Manufacturing overhead						2000
	(To assign overhead to jobs)
12/15.	Finished goods inventory				(8950+6697)	15647
	Work in process inventory						15647
	(To record the completion of jobs)