Question

1. The Premier Manufacturing Company uses a job order costing system. The following data relate to the month of May: a. Raw materials purchased with cash $80,000. b. Direct materials issued to production, $79,000. c. Indirect materials issued to production, $2,500. d. Direct labor cost incurred, $61,000. e. Additional actual manufacturing overhead costs totaled incurred $68,000 for the month (credit Accounts Payable). f. Overhead is applied on a basis of per machine-hour. Estimated total overhead is $80,000, and estimated total machine hours is 40,000. In May, 25,000 machine hours were recorded. g. Depreciation expense for factory equipment is $2,000 and office furniture is $1,500. h. Production orders costing $200,000 were completed during the month. i. During the month, sales invoiced were $94,500. The company uses a 35% mark-up above cost. Required: 1. Prepare journal entries to record the information above. 2. Compute the ending balance of work in process. The beginning balance was $15,000. 3. Compute the over applied or under applied manufacturing overhead.

Answer 1

	Journal Entries
No	Account titles & Explanations					Debit	Credit
a)	Raw materials inventory					80,000
	Cash						80,000
b)	Work in process					79,000
	Raw materials inventory						79,000
c)	Manufacturing overhead					2,500
	Raw materials inventory						2,500
d)`	Work in process					61,000
	Factory wages payable						61,000
e)	Manufacturing overhead					68,000
	Accounts payable						68,000
f)	Work in pro cess					50,000
	Manufacturing overhead						50,000
	(80,000/40,000)*25,000
g)	Manufacturing overhead					2,000
	Depreciation expense					1,500
	Accumulated Depreciation						3,000
h)	Finished goods inventory					200,000
	work in process						200,000
i)	Accounts receivable					94,500
	Sales						94,500
j)	Cost of goods sold					70000
	Finished goods inventory						70,000
	(94500/135*100)
2)	Work in process inventory
	Direct materials		79,000	Finished	70000
	Direct labor		61,000
	MOH		50,000
	End balance		120,000
3)	Actual overhead			72,500
	overhead applied			50,000
	overhead under applied			22,500