Question

PROBLEM IV

Derby Music Company specializes in producing and packaging compact discs (CDs) for the music recording industry. Derby use a job order cost system. The following data summarize the operations related to production for March, the first month of operations:

a. Materials purchased on account. $15,500.

b. Materials requisitioned and labor used.

?Materials?Factory Labor

Job No. 100?$2,650?? $1,770

Job No. 101? 1,240?? 650

Job No. 102? 980?? 420

Job No. 103? 3,420?? 1,900

Job No. 104? 1,000?? 500

Job No. 105? 2,100?`?? 1,760

For general factory use? 450?? 650

c. Factory overhead costs incurred on account. $2,700

d. Depreciation of machinery. $1,750

e. Factory overhead is applied at a rate of 70% of direct labor cost.

f. Jobs completed: Nos. 100, 101, 102, 104

g. Jobs 100, 101, 102 were shipped and customers were billed for $8,100, $3,800 and $3,500 respectively.

INSTRUCTIONS

1. Journalize the entries to record the transactions indentified above.

2. Determine the account balances for Work in Process and Finished Goods.

3. Prepare a schedule of unfinished jobs to support the balances in the work in process account

4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account.

Answer 1

Solution 1:

Schedule of Unifinished Job, Jobs Completed on hand, jobs completed and sold
Particualrs	Unifinished Jobs			Job completed on hand	Job completed and sold
	Job No 103	Job No 105	Total	Job No 104	Job No 100	Job No 101	Job No 102	Total
Direct material	$3,420.00	$2,100.00	$5,520.00	$1,000.00	$2,650.00	$1,240.00	$980.00	$4,870.00
Direct labor	$1,900.00	$1,760.00	$3,660.00	$500.00	$1,770.00	$650.00	$420.00	$2,840.00
Factory overhead applied (70% of DL Cost)	$1,330.00	$1,232.00	$2,562.00	$350.00	$1,239.00	$455.00	$294.00	$1,988.00
Total	$6,650.00	$5,092.00	$11,742.00	$1,850.00	$5,659.00	$2,345.00	$1,694.00	$9,698.00

Journal Entries
Event	Particulars	Debit	Credit
a	Raw material inventory Dr	$15,500.00
	To Accounts payable		$15,500.00
	(To record purchase of material on account)
b-1	Work In Process Inventory Dr	$11,390.00
	Manufacturing overhead Dr	$450.00
	To Raw material inventory		$11,840.00
	(To record issue of material to production)
b-2	Work In Process Inventory Dr	$7,000.00
	Manufacturing overhead Dr	$650.00
	To Factory Wages		$7,650.00
	(Being factory wages charge to production)
c	Manufacturing overhead Dr	$2,700.00
	To Accounts payable		$2,700.00
	(To record factory overhead incurred)
d	Manufacturing overhead Dr	$1,750.00
	To Accumulated depreciation - Machinery		$1,750.00
	(To record depreciation on machine)
e	Work In Process Inventory Dr ($7,000*70%)	$4,900.00
	To Manufacturing overhead		$4,900.00
	(To record manufacturing overhead applied)
f	Finished goods inventory Dr	$11,548.00
	To Work In Process Inventory		$11,548.00
	(Being job completed transferred to finished goods inventory)
g-1	Accounts receivables Dr	$15,400.00
	To Sales revenue		$15,400.00
	(To record jobs billed to customer)
g-2	Cost of goods sold Dr	$9,698.00
	To Finished goods inventory		$9,698.00
	(To record cost of goods sold)

Solution 2:

Work In Process
Particulars	Debit	Particulars	Credit
Direct material	$11,390.00	Fininshed goods	$11,548.00
Direct labor	$7,000.00	Ending balance	$11,742.00
Manufacturing overhead	$4,900.00
Total	$23,290.00	Total	$23,290.00

Finished goods
Particulars	Debit	Particulars	Credit
Work in Process inventory	$11,548.00	Cost of goods sold	$9,698.00
		Ending balance	$1,850.00
Total	$11,548.00	Total	$11,548.00

Solution 3:

Schedule of Unfinished Jobs
Particualrs	Unifinished Jobs
	Job No 103	Job No 105	Total
Direct material	$3,420.00	$2,100.00	$5,520.00
Direct labor	$1,900.00	$1,760.00	$3,660.00
Factory overhead applied (70% of DL Cost)	$1,330.00	$1,232.00	$2,562.00
Total	$6,650.00	$5,092.00	$11,742.00

Solution 4:

Schedule of Jobs Completed on hand
Particualrs	Job completed on hand
	Job No 104
Direct material	$1,000.00
Direct labor	$500.00
Factory overhead applied (70% of DL Cost)	$350.00
Total	$1,850.00