Question

Question 3 – Better Than That, Co. provides the following information:

• October 31 inventory of raw materials is $35,000.
• Raw materials purchases in November are $240,000.
• Total factory payroll cost (includes both direct and indirect labor) in November is $105,850.
• Actual factory overhead costs incurred in November are as follows: indirect materials, $15,900; indirect labor, $9,000; factory rent, $25,000; factory utilities, $23,880; and factory equipment depreciation, $42,000.
• The predetermined overhead rate is 120% of direct labor cost.
• Job L5 is sold to a customer in November for $255,000 on account.
• Costs related to the three jobs worked on in November follow.
  

	Job J1				Job L5				Job T2
Balances on October 31	:
Direct materials		$	0			$	0				$ 19,500
Direct labor			0				0				$6,850
Applied overhead			0				0				$8,220
Costs during November:
Direct materials			56,400				101,800			$	72,100
Direct labor			22,550				45,600				28,700
Applied overhead			?				?				?
Status on November 30	In process				Finished (sold)					Finished (unsold)

1. Determine:
   1. The WIP inventory account balance as of October 31^st.
   2. Total direct materials cost for November
   3. Total direct labor cost for November
   4. Total Applied factory OH cost for November
   5. The total costs assigned to each job as of November 30^th (including any balances from October 31).
2. Prepare journal entries for the month of November to record the below transactions (make sure to use proper journal entry formatting and include a brief description of each entry).

1. Raw materials purchases (on credit).
2. Direct materials used in production.
3. Direct labor paid in cash and assigned to Work in Process Inventory.
4. Overhead costs applied to Work in Process Inventory.
5. Indirect materials used and assigned to Factory Overhead.
6. Indirect labor paid in cash and assigned to Factory Overhead.
7. Actual other overhead costs incurred (assume Factory rent and utilities are paid in cash).
8. Transfer of Jobs L5 and T2 to Finished Goods Inventory.
9. Revenue from the sale of Job L5.
10. Cost of goods sold for Job L5.
11. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account (Assume the amount is not material).

Answer 1

Job Cost Details	Job L1	Job L5	Job T2	Total
Balances Oct 31
Direct Materials	-	-	19,500
Direct Labor	-	-	6,850
Applied Overhead	-	-	8,820
WIP Balance Oct 31				35,170
Costs Incurred in Nov
Direct Materials	56,400	101,800	72,100	230,300
Direct Labor	22,550	45,600	28,700	96,850
Applied Overhead @120% of Direct Labor cost	27,060	54,720	34,440	116,220
Total Job Cost	106,010	202,120	170,410	478,540
Job status at Nov end		sold	FG

Ans a.
WIP Inventory Balance Oct 31	35,170
Total Direct Materials cost Nov	230,300
Total Direct Labor cost Nov	96,850
Total applied Factir OH for Nov =	116,220

Total costs assigned to each job
Job Cost Details	Job L1	Job L5	Job T2
Total Job Cost	106,010	202,120	170,410

	Ans b
	Journal entries
Sr No	Account Title	Dr $	Cr $
1	Raw Materials Inventory	240,000
	Accounts Payable		240,000
	(Raw materials purchased on a/c)
2	Work In Process	230,300
	Raw Materials Inventory		230,300
	( Issue of Direct materials to WIP)
3	Work In Process	96,850
	Cash		96,850
	( Direct labor cost paid in cash assigned to WIP )
4	Work In Process	116,220
	Factory Overhead		116,220
	( Factory OH applied to WIP a/c)
5	Factory Overhead	15,900
	Raw Materials Inventory		15,900
	( Indirect materials used and assigned to Factory OH)
6	Factory Overhead	9,000
	Cash		9,000
	( Indirect labor paid in cash applied to factory OH)
7	Factory Overhead	90,880
	Cash		48,880
	Accumulated Depreciation		42,000
	( factory rent , utilities and depreciation assigned to Factoru OH)
8	Work In Process		372,530
	Finished Goods Inventory	372,530
	( Jobs L5 +T2 transferred to FG )
9	Sales Revenue		255,000
	Accounts Receivable	255,000
	( Sale of Job L5 on a/c)
10	Cost of Goods Sold	202,120
	Finished Goods Inventory		202,120
	( Job L5 cost charged to COGS)
11	Factory Overhead	440
	Cost of Goods Sold		440
	( Overapplied factory OH credited to COGS)