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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, $200,000.

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

Job 136	$	49,500
Job 137		33,000
Job 138		19,600
Job 139		23,000
Job 140		6,800
Total direct materials		131,900
Indirect materials		21,000
Total materials used	$	152,900

Paid $16,000 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	$	12,000
Job 137		10,500
Job 138		37,500
Job 139		39,000
Job 140		3,800
Total direct labor		102,800
Indirect labor		25,500
Total	$	128,300

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	$	69,000
Depreciation of factory equipment		38,500
Expired factory insurance		10,000
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.

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.

	Report of Job Costs Work in Process Inventory Balance Finished Goods Inventory Balance Cost of Goods Sold Balance

Answer 1

Widmer Watercraft

Report showing total cost of each job in process:

	Job No. 136	Job No. 137	Job No. 138	Job No. 139	Job No. 140
Direct Materials	$49,500	$33,000	$19,600	$23,000	$6,800
Direct Labor	$12,000	$10,500	$37,500	$39,000	$3,800
Overhead at 200% of Direct Labor	$24,000	$21,000	$75,000	$78,000	$7,600
Total cost	$85,500	$64,500	$132,100	$140,000	$18,200

Report of Job Costs
Work in Process Inventory
Job 137	$64,500
Job 140	$18,200
Balance	$82,700
Finished Goods Inventory
Job 139	$140,000
Balance	$140,000
Cost of Goods Sold
Job 136	$85,500
Job 138	$132,100
Balance	$217,600

Calculations:

overhead applied to jobs 136, 138 and 139		(12,000 + 37,500 + 39,000) x 200%		88,500 x 200%	$177,000
The entry would be,
	Work in process inventory		$177,000
	Factory overhead			$177,000

transfer of jobs completed (jobs 136, 138 and 139)to finished goods	$85,500 + $132,100 + $140,000	$357,600
The entry would be,
Finished goods inventory	$357,600
Work in process in inventory		$357,600

Jobs 136 and 138 sold on credit at a total price of $550,000
Cost of sales on these jobs, 136 and 138 would be	$85,500 + $133,100	$217,600

overhead applied to Work in Process inventory account on jobs 137 and 140

($10,500 +$3,800) x 200%

$28,600

	Work in Process Inventory
Particulars	Debit	Credit	Balance
Direct Materials	$125,100
Direct labor	$112,800
factory overhead	$177,000
Finished goods inventory		$357,600
overhead applied to jobs	$28,600
Totals	$443,500	$443,500	0
Ending balance			$85,900
	Finished Goods Inventory
Particulars	Debit	Credit	Balance
Work in Process Inventory	$357,600
Cost of sales		$217,600
Ending Balance			$140,000

	Factory Overhead
Particulars	Debit	Credit	Balance
Factory equipment	$16,000
indirect materials	$21,000
indirect labor	$25,500
Work in Process Inventory		$177,000
overhead applied		$28,600
Accu. Depreciation	$69,000
Accu. Depreciation on building	$38,500
Prepaid insurance	$10,000
Property taxes payable	$35,000
Ending balance			$9,400