Question

Widmer Watercraft’s predetermined overhead rate for the year 2017 is 200% of direct labor. Information on the company’s production activities during May 2017 follows.

Purchased raw materials on credit, $220,000.

Materials requisitions record use of the following materials for the month.

Job 136	$49,000
Job 137	33,500
Job 138	19,800
Job 139	22,800
Job 140	6,600
Total direct materials	131,700
Indirect materials	20,000
Total materials used	$151,700

Paid $15,750 cash to a computer consultant to reprogram factory equipment.

Time tickets record use of the following labor for the month. These wages were paid in cash.

Job 136	$12,300
Job 137	10,700
Job 138	37,900
Job 139	39,600
Job 140	3,000
Total direct labor	103,500
Indirect labor	25,000
Total	$128,500

Applied overhead to Jobs 136, 138, and 139.

Transferred Jobs 136, 138, and 139 to Finished Goods.

Sold Jobs 136 and 138 on credit at a total price of $550,000.

The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).

Depreciation of factory building	$69,500
Depreciation of factory equipment	37,000
Expired factory insurance	12,000
Accrued property taxes payable	35,000

Applied overhead at month-end to the Work in Process Inventory account (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.

1. Prepare a job cost sheet for each job worked on during the month.

2. Prepare journal entries to record the events and transactions a through i.

3. Post the journal entries for the transactions to the following T-accounts, each of which started the month with a zero balance.

4. Prepare a report showing the total cost of each job in process and prove that the sum of their costs equals the Work in Process Inventory account balance. Prepare similar reports for Finished Goods Inventory and Cost of Goods Sold.

Answer 1

1.

Job Cost Sheet
	Job No. 136	Job No. 137	Job No. 138	Job No. 139	Job No. 140	Total
Materials	49000	33500	19800	22800	6600	131700
Labor	12300	10700	37900	39600	3000	103500
Overhead	24600	21400	75800	79200	6000	207000
Total cost $	85900	65600	133500	141600	15600	442200

2.

Transaction	General Journal	Debit	Credit
a.	Raw materials inventory	220000
	Accounts payable		220000
	(To record raw materials purchased on credit)
b.	Work in process inventory	131700
	Factory overhead	20000
	Raw materials inventory		151700
	(To record materials requisitioned)
c.	Factory overhead	15750
	Cash		15750
	(To record factory overheads paid)
d.	Work in process inventory	103500
	Factory overhead	25000
	Cash		128500
	(To record payment of factory wages)
e.	Work in process inventory	179600
	Factory overhead		179600
	(To record factory overheads applied)
f.	Finished goods inventory	361000
	Work in process inventory		361000
	(To record jobs transferred to finished goods)
g(1)	Accounts receivable	550000
	Sales revenue		550000
	(To record jobs sold on credit)
g(2)	Cost of goods sold	219400
	Finished goods inventory		219400
	(To record cost of sales)
h.	Factory overhead	153500
	Accumulated depreciation-factory building		69500
	Accumulated depreciation-factory equipment		37000
	Prepaid insurance		12000
	Property taxes payable		35000
	(To record factory overheads incurred)
i.	Work in process inventory	27400
	Factory overhead		27400
	(To record factory overheads applied)

3.

Raw Materials Inventory
Beg. Bal.	0	151700	b.
a.	220000
End. Bal.	68300
Work in Process Inventory
Beg. Bal.	0	361000	f.
b.	131700
d.	103500
e.	179600
i.	27400
End. Bal.	81200
Finished Goods Inventory
Beg. Bal.	0	219400	g(2)
f.	361000
End. Bal.	141600
Factory Overhead
b.	20000	179600	e.
c.	15750	27400	i
d.	25000
h.	153500
End. Bal.	7250
Cost of Goods Sold
g(2)	219400
End. Bal.	219400

4.

Report of Job Costs
Work in Process Inventory
Job 137	65600
Job 140	15600
Balance	81200
Finished Goods Inventory
Job 139	141600
Balance	141600
Cost of Goods Sold
Job 136	85900
Job 138	133500
Balance	219400