Question

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	$	49,000
Job 137		33,000
Job 138		19,800
Job 139		23,200
Job 140		7,000
Total direct materials		132,000
Indirect materials		21,000
Total materials used	$	153,000

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		10,700
Job 138		37,900
Job 139		39,200
Job 140		3,800
Total direct labor		103,600
Indirect labor		26,500
Total	$	130,100

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	$	70,000
Depreciation of factory equipment		37,000
Expired factory insurance		11,000
Accrued property taxes payable		36,500

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.

1. Prepare a job cost sheet for each job worked on during the month.
2. Prepare journal entries to record the events and transactions a through i.
3. Post the journal entries for the transactions to the following T-accounts, each of which started the month with a zero balance.

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.

Answer 1

			job 136	job 137	job138	job139	job140	total
	Materials		49,000	33,000	19,800	23,200	7,000	132,000
	labor		12,000	10,700	37,900	39,200	3,800	103,600
	overhead		24,000	21400	75800	78400	7600	207,200
	total		85,000	65,100	133,500	140,800	18,400	442,800
	2)	TR	General Journal				Debit	Credit
		a)	Raw materials inventory				200,000
			Accounts payable					200,000
		b)	Work in process inventory				132,000
			Factory overhead				21,000
			Raw materials inventoy					153,000
		c)	Factory overhead				16,000
			cash					16,000
		d)	Work in process inventory				103,600
			Factory overhead				26,500
			Cash					130,100
		e)	Work in process overhead				178,200
			Factory overhead					178,200
		f)	finished goods inventory				359,300
			Work in process inventory					359,300
		g)	Accounts receivable				550,000
			Sales					550,000
			cost of goods sold				218,500
			finished goods inventory					218,500
		h)	Factory overhead				154,500
			Accumulated depreciation-factory building					70,000
			Accumulated depreciation-factory equipment					37,000
			prepaid insurance					11,000
			property taxes payable					36,500
		i)	work in process inventory				29,000
			Factory overhead					29,000
		T- Accounts
	Raw materials inventory					Work in process inventory
	a.	200,000				b.	132,000
			153,000	b.		d.	103,600
						e.	178,200
	end bal	47,000						359,300	f.
						i.	29000
						bal	83,500
	Factory overhead					finished goods inventory
	b.	21,000				f.	359,300
	c.	16,000						218,500	g.
	d.	26,500				bal	140,800
			178,200	e.
	h.	154,500
			29,000	i
	bal	10,800
	cost of goods sold
	g.	218,500
	end bal	218,500
	Report of Job costs
	Work in process inventory
	job 137			65,100
	job 140			18,400
	Balance			83,500
	finished goods inventory
	job 139			140,800
	Balance			140,800
	cost of goods sold
	job 136			85,000
	job 138			133,500
	balance			218,500