Question

The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.

	April 30				May 31
Inventories
Raw materials	$	38,000			$	55,000
Work in process		9,100				18,100
Finished goods		60,000				33,600
Activities and information for May
Raw materials purchases (paid with cash)						177,000
Factory payroll (paid with cash)						150,000
Factory overhead
Indirect materials						7,000
Indirect labor						34,500
Other overhead costs						117,000
Sales (received in cash)						1,000,000
Predetermined overhead rate based on direct labor cost						55	%

1. Raw materials purchases for cash.
2. Direct materials usage.
3. Indirect materials usage.

  
Prepare journal entries for direct labor charge, indirect labor charge, and the cash payment of total factory payroll.

Record other Factory overhead costs (excluding indirect materials and indirect labor). Record credit to Other Accounts.

Record the application of overhead to work in process.

Answer 1

1. Journal entries to record direct labor charge

2. Journal entries to record indirect labor charge

3. Journal entries to record cash payment of total factory payroll

4. Journal entries to record Factory overhead costs (excluding indirect materials and indirect labor).  

5. Journal entries to record the application of overhead to work in process

.

.

Transaction	General Journal	Debit	Credit
1	Work-In process Inventory     (Refer working note 1)	$115,500
	Factory Wages Payable		$115,500
	(To record direct labor usage)
2	Factory Overhead	$34,500
	Factory Wages Payable		$34,500
	(To record indirect labor usage)
3	Factory Wages Payable	$150,000
	Cash		$150,000
	(To record the payment of total factory payroll)
4	Factory overhead	$117,000
	Other accounts		$117,000
	(To record other factory overhead cost)
5	Work-In process Inventory	$63,525
	Factory overhead    (Refer working note 2)		$63,525
	(To record the application of factory overhead)

.

Working note 1 - Computation of direct labor cost
Total factory payroll	=	Direct labor + Indirect labor
Total factory payroll	=	$150,000	(Given in question)
Less: Indirect labor cost	=	($34,500)	(Given in question)
Direct labor cost	=	$115,500

.

.

Working note 2 - Computation of the amount of factory overhead applied to work-in-process inventory

**Factory overhead is applied to work-in-process inventory using the predetermined overhead rate of 55% of direct labor cost.

.

Direct labor cost (calculated above)	=	$115,500
Overhead rate	=	55%
Factory overhead applied   ($115,000*55%)	=	$63,525