Question

In: Accounting

Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage...

Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2016 follow:

Raw Materials Inventory $ 16,400
Work in Process Inventory 6,200
Finished Goods Inventory 20,700


The following transactions occurred during January:
(a) Purchased materials on account for $26,300.
(b) Issued materials to production totaling $20,800, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials.
(c) Payroll costs totaling $17,100 were recorded as follows:
    $10,800 for assembly workers
     1,400 for factory supervision
     2,800 for administrative personnel
      2,100 for sales commissions
(d) Recorded depreciation: $5,900 for machines, $1,100 for the copier used in the administrative office.
(e) Recorded $1,000 of expired insurance. Forty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense.
(f) Paid $5,600 in other factory costs in cash.
(g) Applied manufacturing overhead at a rate of 200 percent of direct labor cost.
(h) Completed all jobs but one; the job cost sheet for this job shows $2,100 for direct materials, $2,200 for direct labor, and $4,400 for applied overhead.
(i) Sold jobs costing $50,500. The revenue earned on these jobs was $65,650.

Required:
1. Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts: (Post all amounts separately. Do not combine/add any dollar amounts when posting to the t-accounts.)

Raw Materials Inventory.

Work in Process Inventory.

Finished Goods Inventory.

Cost of Goods Sold.

Selling, General, and Administrative Expenses.

Sales Revenue.

Other accounts (Cash, Payables, etc.).

2. Determine how much gross profit the company would report during the month of January before any adjustment is made for the overhead balance.



3. Determine the amount of over- or underapplied overhead.



4. Compute adjusted gross profit assuming that any over- or underapplied overhead balance is adjusted directly to Cost of Goods Sold.

Solutions

Expert Solution

1.

Raw Materials Inventory Work in Process Inventory
Debit Credit Debit Credit
Beg. Bal. 16400 Beg. Bal. 6200
(a) 26300 20800 (b) (b) 18720
End. Bal. 21900 (c) 10800
(g) 21600 48620 (h)
End. Bal. 8700
Finished Goods Inventory Cost of Goods Sold (COGS)
Debit Credit Debit Credit
Beg. Bal. 20700 (i) 50500
(h) 48620 50500 (i)
End. Bal. 18820 End. Bal. 50500
Manufacturing Overhead Selling, General, Administrative Exp.
Debit Credit Debit Credit
(b) 2080 (c) 2800
(c) 1400 (c) 2100
(d) 4800 (d) 1100
(e) 400 (e) 600
(f) 5600 21600 (g)
End. Bal. 7320 End. Bal. 6600
Sales Revenue Other Accounts (Cash, Payables, etc.)
Debit Credit Debit Credit
65650 (i) (i) 65650 26300 (a)
10800 (c)
End. Bal. 65650 1400 (c)
2800 (c)
2100 (c)
1100 (d)
4800 (d)
1000 (e)
5600 (f)
End. Bal. 9750

2. Unadjusted gross profit = Sales revenue - Cost of goods sold = $65650 - $50500 = $15150

3. Manufacturing overhead $7320 overapplied

Actual overheads $14280 - Overheads applied $21600 = Overapplied overheads $7320

4. Adjusted gross profit = Sales revenue - Adjusted cost of goods sold = $65650 - $43180 = $22470

Adjusted cost of goods sold = $50500 - $7320 = $43180


Related Solutions

Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2018 follow: Raw Materials Inventory: 15,700 Work in Process: 6,000 Finished Goods Inventory: 20,100 The following transactions occurred during January: (a) Purchased materials on account for $26,900. (b) Issued materials to production totaling $20,800, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials. (c)...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2016 follow: Raw Materials Inventory $ 16,000 Work in Process Inventory 6,100 Finished Goods Inventory 20,400 The following transactions occurred during January: (a) Purchased materials on account for $26,600. (b) Issued materials to production totaling $20,300, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2018 follow: Raw Materials Inventory $ 16,700 Work in Process Inventory 6,200 Finished Goods Inventory 21,000 The following transactions occurred during January: (a) Purchased materials on account for $27,800. (b) Issued materials to production totaling $20,500, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2016 follow: Raw Materials Inventory $ 17,000 Work in Process Inventory 6,300 Finished Goods Inventory 20,500 The following transactions occurred during January: (a) Purchased materials on account for $26,400. (b) Issued materials to production totaling $22,000, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2016 follow: Raw Materials Inventory: $ 15,200 Work in Process Inventory: 5,700 Finished Goods Inventory: 21,200 The following transactions occurred during January: (a) Purchased materials on account for $26,800. (b) Issued materials to production totaling $21,800, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage...
Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2016 follow: Raw Materials Inventory $ 15,700 Work in Process Inventory 6,700 Finished Goods Inventory 21,300 The following transactions occurred during January: (a) Purchased materials on account for $26,800. (b) Issued materials to production totaling $21,000, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect...
Tyler Tooling Company uses a job order cost system with overhead applied to products on the...
Tyler Tooling Company uses a job order cost system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $225,720 and total machine hours at 62,700. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job:     Job 101 Job 102 Job 103 Total Direct materials used $...
ABC Company uses a job order cost system with overhead applied to products on the basis...
ABC Company uses a job order cost system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $259,530 and total machine hours at 63,300. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job:     Job 101 Job 102 Job 103 Total Direct materials used $ 11,800...
ABC Company uses a job order cost system with overhead applied to products on the basis...
ABC Company uses a job order cost system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $222,840 and total machine hours at 61,900. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job: Job 101 Job 102 Job 103 Total Direct materials used $ 10,200...
BJenkins Company uses a job order cost system with overhead applied to jobs on the basis...
BJenkins Company uses a job order cost system with overhead applied to jobs on the basis of direct labor hours. The direct labor rate is $20 per hour, and the predetermined overhead rate is $15 per direct labor hour. The company worked on three jobs during April. Jobs A and B were in process at the beginning of April. Job A was completed and delivered to the customer. Job B was completed during April, but not sold. Job C was...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT