Question

Grass Mower Company manufacturers a variety of gasoline-powered mowers for discount hardware and department stores. The company uses a job cost system and treats each customer's order as a separate job. The primary mower components (motors, chassis, and wheels) are purchased from three different suppliers under long-term contracts that call for the direct delivery of raw materials to the production floor as needed. When a customer's order is received, a raw materials purchase order is electronically placed with suppliers. The purchase order specifies the scheduled date that production is to begin as the delivery date for motors and chassis, the scheduled date production is to be completed is specified as the delivery date for the wheels. As a consequence, there are no raw materials inventories; raw materials are charged directly to Work-in-process upon receipt. Upon completion goods are shipped directly to customers rather than transferred to finished goods inventory.

At the beginning of September the company had the following work-in-process inventories:

Job 1	$20,000
Job 2	15,000
Job 3	16,000
Job 4	9,000
Total	$60,000

During September, the following activities took place:

1. Started jobs 5,6, and 7.
2. Ordered and received the following raw materials for specified jobs:
	Motors	Chassis	Wheels	Total
Job 2	0	0	$700	$700
Job 3	0	0	1,100	1,100
Job 4	0	0	1,500	1,500
Job 5	1,000	4,000	1,000	6,000
Job 6	8,000	3,500	900	12,400
Job 7	7,500	3,800	0	11,300
Total				$33,000

3. Incurred September manufacturing payroll:

Direct Labor
Job 1	$600
Job 2	3,100
Job 3	3,000
Job 4	4,000
Job 5	1,500
Job 6	2,500
Job 7	2,000
Total Direct Labor	16,700
Indirect Labor	3,000

4. Incurred additional manufacturing overhead costs for September:

Manufacturing supplies purchased and used				$2,000
Depreciation on factory fixed assets				5,000
Factory utilities				5,000

5. Applied manufacturing overhead using a predetermined rate based on predicted annual overhead

Predicted Annual Overhead	$184,500
Predicted Annual Direct Labor cost	$205,000

6. Completed and shipped jobs 1 and 6. The following is what was charged to these customers:

Job 1	28,000
Job 6	26,000
Total	54,000

7. Selling and Administrative costs incurred in September are the following: $4000

Required:

1. Develop the predetermined overhead rate.

2. Complete the job cost sheets provided below:

	Job 1	Job 2	Job 3	Job 4	Job 5	Job 6	Job 7
Beginning Balance
Current costs:
Direct materials
Direct Labor
Applied overhead
Total

3. Determine the ending Work-In-Process Inventory at the end of September and provide the number of the Jobs still in Work-in-Process at the end of September.

4. Determine the Cost of Goods Sold for September and provide the number of the Jobs in Cost of Goods Sold for September.

5. Prepare a statement of cost of goods manufactured for September below. Use Manufacturing Overhead applied in your statement.

	Grass Mower Company
	Statement of Cost of Goods Manufactured
	For Month ending September 30, 2018
Current manufacturing costs:
Cost of material placed in production
Direct Labor
Manufacturing overhead Applied
Work-in-process September 1, 2018
Total costs in process
Work-in-process September 30, 2018
Cost of goods manufactured

6. Prepare an Income Statement for September below. The company does not close the over or underapplied overhead until the end of the year, so no adjustment is needed to Cost of Goods Sold.

	Grass Mower Company
	Income Statement
	For Month ending September 30, 2018
Sales
Cost of goods sold
Gross Profit
Selling and Administrative expenses
Net income

7. Determine the underapplied or overapplied manufacturing for September.

8. Provide percentages of all jobs showing the jobs that are in work-in-process at the end of September.

Answer 1

Predetermined Overhead rate = $ 184,500/$205,000	0.90	per labour cost
	Job 1	Job 2	Job 3	Job 4	Job 5	Job 6	Job 7
Beginning Balance	20,000	15,000	16,000	9,000
Current costs:
Direct materials		700	1,100	1,500	6,000	12,400	11,300
Direct Labor	600	3,100	3,000	4,000	1,500	2,500	2,000
Applied overhead (0.90 per labour cost)	540	2,790	2,700	3,600	1,350	2,250	1,800
Total	21,140	21,590	22,800	18,100	8,850	17,150	15,100
Ending Septemember work-in-process inventories:
Job 2	21,590
Job 3	22,800
Job 4	18,100
Job 5	8,850
Job 7	15,100
Ending work in progress inventory	86,440
Costs of good sold	Job 1	Job 6
Opening	20,000
Direct Material		12,400
Direct Labour	600	2,500
Manufacturing overhead	540	2,250
Total	21,140	17,150
Grass Mower Company Statement of Cost of Goods Manufactured For Month ending September 30, 2018 Current manufacturing costs: Cost of material placed in production $          33,000 Direct Labor          16,700 Manufacturing overhead Applied          15,030 Work-in-process September 1, 2018          60,000 Total costs in process        124,730 Work-in-process September 30, 2018          86,440 Cost of goods manufactured   $          38,290