Question

1. During the current month, Waterway Company incurs the following manufacturing costs.

(a)		Purchased raw materials of $17,800 on account.
(b)		Incurred factory labor of $38,200.
(c)		Factory utilities of $3,800 are payable, prepaid factory property taxes of $2,810 have expired, and depreciation on the factory building is $9,800.

Record the company’s manufacturing costs in its job order costing system.

2. During January, its first month of operations, Ayayai Company accumulated the following manufacturing costs: raw materials purchased $4,100 on account, factory labor $6,100, and utilities payable $2,100.

Record the company’s manufacturing costs in its job order costing system.

3. Waterway Company estimates that annual manufacturing overhead costs will be $902,000. Estimated annual operating activity bases are direct labor cost $440,000, direct labor hours 50,000, and machine hours 110,000.

Compute the predetermined overhead rate for each activity base. (Round answers to 2 decimal places, e.g. 10.50.)

Overhead rate per direct labor cost		enter overhead rate per direct labor cost in percentages	%
Overhead rate per direct labor hour		$enter overhead rate per direct labor hour in dollars
Overhead rate per machine hour		$enter overhead rate per machine hour in dollars

Answer 1

Question 1

S.No.	Particulars	Debit	Credit
(A)	Raw Materials Inventory A/C..Dr	17,800
	To Accounts Payables		17,800
	(Being Raw Materials purchased on Account)
(B)	Work in Process Inventory A/C...Dr	38,200
	To Factory Labour		38,200
	(Being Factory Labour Recorded)
(C)	Manufacturing Overhead A/C..Dr	16,410
	To Factory Utilities		3,800
	To Factory Property Taxes		2,810
	To Factory Building Depreciation		9,800
	(Being Manufacturing Overhead Recorded)

Question 2

S.No.	Particulars	Debit	Credit
(A)	Raw Materials Inventory A/C..Dr	4,100
	To Accounts Payables		4,100
	(Being Materials Purchased on Account Recorded)
(B)	Work in Process Inventory A/C..Dr	6,100
	To Factory Labour		6,100
	(Being Factory Labour Recorded)
(C)	Manufacturing Overhead A/C..Dr	2,100
	To Utilities Payable		2,100
	(Being Factory Utilities Recorded)

Question 3

Part A

Overhead Rate Based on Direct Labour Cost = Total Manufacturing Overhead / Direct Labour Cost * 100

Total Manufacturing Overheads = $ 902,000

Direct Labour Cost = $ 440,000

Predetermined Overhead Rate Based on Direct Labour Cost = 902,000 / 440,000 * 100

Predetermined Overhead Rate = 205% of Direct Labour Cost

Part B

Predetermined Overhead Rate based on Direct Labour Hours = Total Manufacturing Overhead / Total Direct Labour Hours

Total Manufacturing Overhead Cost = $ 902,000

Total Direct Labour Hours = 50,000 Hours

Predetermined Overhead Rate based on Direct Labour Hours = 902,000 / 50,000

Predetermined Overhead Rate = $ 18.04 per Direct Labour Hour

Part C

Predetermined Overhead Rate based on Machine Hours = Total Manufacturing Overhead Costs / Total Machine Hours

Total Manufacturing Overheads Costs = $ 902,000

Total Machine Hours = 110,000 Hours

Predetermined Overhead Rate = 902,000 / 110,000

Predetermined Overhead Rate = $ 8.2 per Machine Hour