In: Accounting
Mastery Problem: Job Order Costing
Purl of Great Price Company
Maria Young is the sole stockholder of Purl of Great Price Company (POGP Company), which produces high-end knitted sweaters and sweater vests for sale to retail outlets. The company started in January of the current year, and employs three knitters (each of whom work 40 hours per week) and one office manager/knitting supervisor (this employee works 20 hours per week as office manager, and 20 hours per week as knitting supervisor). All wages are paid in cash at the end of each month.
Each knitter has a knitting machine that is used about 2/3 of the knitter’s time, the rest of the knitter’s time being involved in hand knitting and piecing together the garments. The company also has a packaging machine used to wrap the garments in plastic for shipping, which is operated by the office manager/knitting supervisor approximately 5 hours per week.
The knitting machines were purchased on January 1 of the current year, and cost $2,400 each, with an anticipated useful life of 10 years and no salvage value. The packaging machine was purchased on the same date and cost $4,800, with the same anticipated useful life and salvage value.
Nov. 30 Trial Balance
POGP Company Trial Balance November 30, 20Y8 |
||
Account Title | Debit | Credit |
Cash | 20,000 | |
Accounts Receivable | 1,000 | |
Supplies | 200 | |
Materials | 5,000 | |
Work in Process | 5,404 | |
Equipment | 12,000 | |
Accumulated Depreciation-Equipment | 825 | |
Accounts Payable | 150 | |
Common Stock | 10,000 | |
Retained Earnings | 12,000 | |
Dividends | 18,096 | |
Sales | 307,500 | |
Cost of Goods Sold | 255,040 | |
Factory Overhead | 15 | |
Wages Expense | 13,750 | |
330,490 | 330,490 |
Predetermined Factory Overhead Rate
Since the company is more reliant on labor than machines, Maria decides to use direct labor hours (DLH) as the activity base for her predetermined factory overhead rate, rather than machine hours (MH).
Estimated Selected Amounts for the Year | |
Estimated depreciation on equipment | $1,200 |
Estimated total Office Manager/Knitting Supervisor wages | $30,000 |
Estimated office utilities | $5,000 |
Estimated factory utilities | $4,800 |
Estimated factory rent | $24,000 |
Activity Base Data | |
Estimated number of DLH for the year | 5,000 |
Estimated number of MH for the year | 3,500 |
Compute the predetermined factory overhead rate for the current year.
$9.00 per DLH
Feedback
Materials Requisition | Date: Dec. 10 | ||
Req. No. 12255 | Job No. 83 | ||
Description | Qty. Issued | Unit Price | Amount |
Yarn type B | 700 skeins | $5 | $3,500 |
Total issued | $3,500 |
Time Ticket | No. 1255 | Name: | Susan Blake | |
Work Description: | Knitting/piecing | |||
Dates | Job No. | Hours Worked | Unit Price | Amount |
12/01-12/15 | 62 | 65 | $15 | $975 |
12/16-12/31 | 83 | 103 | 15 | 1,545 |
Total Cost | $2,520 |
Time Ticket | No. 2274 | Name: | Josh Porter | |
Work Description: | Knitting/piecing | |||
Dates | Job No. | Hours Worked | Unit Price | Amount |
12/01-12/15 | 62 | 75 | $15 | $1,125 |
12/16-12/31 | 83 | 88 | 15 | 1,320 |
Total Cost | $2,445 |
Time Ticket | No. 3923 | Name: | Mary Jones | |
Work Description: | Knitting/piecing | |||
Dates | Job No. | Hours Worked | Unit Price | Amount |
12/01-12/15 | 62 | 60 | $15 | $900 |
12/16-12/31 | 83 | 109 | 15 | 1,635 |
Total Cost | $2,535 |
Job Cost Sheets
On December 10, POGP Company receives an order for 200 sweater vests and assigns Job 83 to the order. Review the Materials Requisition table to add the materials to the Job Cost Sheet for Job 83.
On December 15, review the Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 62 for the period December 1 through December 15.
On December 31, the last work day of the year for the knitters, review Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 83 for the period December 16 through December 31.
If there is no amount or an amount is zero, enter "0". If required, round your answers to the nearest cent.
Job 62 | 100 units: | Sweaters | ||
Direct Materials | Direct Labor | Factory Overhead | Total | |
Balance Dec. 1 | $5,000 | $300 | $104 | $5,404 |
Dec. 15 | ||||
Total Cost | $ | $ | $ | $ |
Unit Cost | $ |
Job 83 | 200 units: | Sweater vests | ||
Direct Materials | Direct Labor | Factory Overhead | Total Job Cost | |
Balance Dec. 1 | $0 | $0 | $0 | $0 |
Dec. 10 | ||||
Dec. 31 | ||||
Total Cost | $ | $ | $ | $ |
Feedback
Journal
On December 10, POGP Company receives an order for 200 sweater vests and assigns Job 83 to the order. Review the Materials Requisition table to journalize the entry to record the addition of the materials to Work in Process. If an amount box does not require an entry, leave it blank.
Dec. 10 | Work in Process | ||
Materials |
Feedback
On December 15, review the Time Ticket tables to journalize the entry to record the addition of direct labor to Work in Process for the period December 1 through December 15. If an amount box does not require an entry, leave it blank.
Dec. 15 | Work in Process | ||
Wages Payable |
Feedback
On December 15, review the Time Ticket tables to journalize the entry to record the addition of factory overhead to Work in Process for the period December 1 through December 15. If an amount box does not require an entry, leave it blank.
Dec. 15 | Work in Process | ||
Factory Overhead |
Feedback
On December 21, Job 62 is completed. Review the Job Cost Sheets and your journal entries. Journalize the entry to move the associated costs to the finished goods account. If an amount box does not require an entry, leave it blank.
Dec. 21 | Finished Goods | ||
Work in Process |
Feedback
On December 22, 75 of the 100 sweaters from Job 62 are sold on account for $125 each. Journalize the following transactions:
a. The entry to record the sale.
b. The entry to record the transfer of costs from Finished Goods to Cost of Goods Sold.
If an amount box does not require an entry, leave it blank.
Dec. 22 | Accounts Receivable | ||
Sales | |||
Dec. 22 | Cost of Goods Sold | ||
Finished Goods |
Feedback
On December 31, the last work day of the year for the knitters, review the Time Ticket tables to journalize the entry to record the addition of direct labor to Work in Process for the period December 16 through December 31. If an amount box does not require an entry, leave it blank.
Dec. 31 | Work in Process | ||
Wages Payable |
Feedback
On December 31, the last work day of the year for the knitters, review the Time Ticket tables to journalize the entry to record the addition of factory overhead to Work in Process for the period December 16 through December 31. If an amount box does not require an entry, leave it blank.
Dec. 31 | Work in Process | ||
Factory Overhead |
Feedback
On December 31, journalize the following transactions. Note that expenses (b), (c), and (d) were paid in cash.
a. One month’s depreciation on equipment
b. One month’s payroll for all employees
c. One month’s rent of $2,000
d. One month’s factory utilities of $1,275
If an amount box does not require an entry, leave it blank.
Dec. 31 | Factory Overhead | ||
Wages Expense | |||
Wages Payable | |||
Cash | |||
Accumulated Depreciation-Equipment |
Feedback
On December 31, prepare the journal entry to dispose of the balance in the factory overhead account. If an amount box does not require an entry, leave it blank.
Dec. 31 | Cost of Goods Sold | ||
Factory Overhead |
Feedback
Final Question
What are the balances in the following accounts as of December 31? If an amount is zero, enter "0".
Materials | $ |
Work in Process | $ |
Finished Goods | $ |
Factory Overhead | $ |
Cost of Goods Sold | $ |
Overhead rate = ($1200+15000+4800+24000) / 5000 = $9 per DLH
Job 62 | ||||
Direct material | Direct labor | Factory Overhead | Total | |
Balance Dec 1 | $ 5,000 | $ 300 | $ 104 | $ 5,404 |
Dec. 15 | $ - | $ 3,000 | $ 1,800 | $ 4,800 |
Total Cost | $ 5,000 | $ 3,300 | $ 1,904 | $ 10,204 |
Unit Cost | $ 102.04 | |||
Job 83 | ||||
Direct material | Direct labor | Factory Overhead | Total | |
Balance Dec 1 | $ - | $ - | $ - | $ - |
Dec. 10 | $ 3,500 | $ 3,500 | ||
Dec. 31 | $ 4,500 | $ 2,700 | $ 7,200 | |
Total Cost | $ 3,500 | $ 4,500 | $ 2,700 | $ 10,700 |
Date | Account Titles | Debit | Credit |
10-Dec | Work in Process | $ 3,500 | |
Materials | $ 3,500 | ||
15-Dec | Work in Process | $ 3,000 | |
Wages Payable | $ 3,000 | ||
15-Dec | Work in Process | $ 1,800 | |
Factory Overhead | $ 1,800 | ||
21-Dec | Finished Goods | $ 10,204 | |
Work in Process | $ 10,204 | ||
22-Dec | Accounts Receivable | $ 9,375 | |
Sales | $ 9,375 | ||
22-Dec | Cost of Goods Sold | $ 7,653 | |
Finished Goods | $ 7,653 | ||
31-Dec | Work in Process | $ 4,500 | |
Wages Payable | $ 4,500 | ||
31-Dec | Work in Process | $ 2,700 | |
Factory Overhead | $ 2,700 | ||
31-Dec | Factory Overhead | $ 4,625 | |
Wages Expense | $ 1,250 | ||
Wages Payable | $ 7,500 | ||
Cash | $ 13,275 | ||
Accumulated Depreciation | $ 100 |
Date | Account Titles | Debit | Credit |
31-Dec | Cost of Goods Sold | $ 110 | |
Factory Overhead | $ 110 |
Actual Overhead = $4625
Overhead applied = $4500
Underapplied Overhead = $4500-4625 = $125
Balances
Materials = $5000-3500 = $1500
Work in Process = $10700
Finished Goods = 25 x $102.04 = $2551
Factory Overhead = 0
Cost of Goods Sold = $255040+7653+110 = $262803