Question

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,354,800 in manufacturing overhead cost at an activity level of 573,000 machine-hours.

The company spent the entire month of January working on a large order for 13,000 custom-made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:

1. Raw materials purchased on account, $313,000.
2. Raw materials used in production, $267,000 (80% direct materials and 20% indirect materials).
3. Labor cost accrued in the factory, $159,000 (one-third direct labor and two-thirds indirect labor).
4. Depreciation recorded on factory equipment, $62,600.
5. Other manufacturing overhead costs incurred on account, $84,600.
6. Manufacturing overhead cost was applied to production on the basis of 40,770 machine-hours actually worked during the month.
7. The completed job for 13,000 custom-made machined parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)

Required:

1. Prepare journal entries to record items (a) through (f) above [ignore item (g) for the moment].

2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts.

3. Prepare a journal entry for item (g) above.

4. If 10,900 of the custom-made machined parts are shipped to the customer in February, how much of this job’s cost will be included in cost of goods sold for February.

• Required 1

Prepare journal entries to record items (a) through (f) above [ignore item (g) for the moment]. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

Journal entry worksheet

Note: Enter debits before credits.

	Raw materials purchase on account,$313,000.
	Transaction General Journal Debit Credit a.

• Required 2

Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts

	Manufacturing Overhead Work in Process End. Bal. 0 End. Bal.

Required 3

Prepare a journal entry for item (g) above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

Note: Enter debits before credits. Record the entry to transfer from WIP to Finished goods.

	Transaction General Journal Debit Credit g.

• Required 4

If 10,900 of the custom-made machined parts are shipped to the customer in February, how much of this job’s cost will be included in cost of goods sold for February? (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.)

Portion of job cost included in cost of good sold ________________

Answer 1

Transaction	General Journal				Debit	Credit
a.	Raw materials inventory				313,000
	Accounts payable					313,000
b.	Work in process inventory				213600
	Manufacturing overhead				53400
	Raw materials inventory					267,000
c.	Work in process inventory				53,000
	Manufacturing overhead				106,000
	Factory wages payable					159,000
d.	manufacturing overhead				62,600
	Accumulated depreciation					62,600
e.	Manufacturing overhead				84,600
	Accounts paybale					84,600
f.	work in process inventory				309852
	manufacturing overhead					309,852
	(4,354,800/573000)*40770
2)	Manufacturing overhead
	b.	53400	309852	f.
	c.	106,000
	d.	62,600
	e.	84,600
	end bal		3,252
	work in process
	b.	213600
	c.	53,000
	f.	309852
	end bal	576452
3)
g.	finished goods inventory				576452
	Work in process inventory					576452
4)	cost of goods sold
	unit cost	576452/13000=		44.34
	hence cost of goods sold (44.34*10900)=				483333