Question

Jensen Fences uses job order costing. Manufacturing overhead is charged to individual jobs through the use of a predetermined overhead rate based on direct labor costs. The following information appears in the company’s Work in Process Inventory account for the month of June. Debits to account: Balance, June 1 $ 5,000 Direct materials 18,000 Direct labor 12,000 Manufacturing overhead (applied to jobs as 125% of direct labor cost) 15,000 Total debits to account $ 50,000 Credits to account: Transferred to Finished Goods Inventory account 44,000 Balance, June 30 $ 6,000 Required: a. Assuming that the direct labor charged to the jobs still in process at June 30 amounts to $1,600, compute the amount of manufacturing overhead and the amount of direct materials that have been charged to these jobs as of June 30. b. Prepare general journal entries to summarize: 1. The manufacturing costs (direct materials, direct labor, and overhead) charged to production during June. 2. The transfer of production completed during June to the Finished Goods Inventory account. 3. The cash sale of 80 percent of the merchandise completed during June at a total sales price of $50,000. Show the related cost of goods sold in a separate journal entry.

Answer 1

given data

balance amount on 1 june = $ 5000

direct material = $ 18000

direct labor = $ 12000

manufacturing overheds (125% of direct labor cost) = $ 15000

transfered to finished goods = $ 44000

balance on 30 june = $ 6000 (job in process)

A) COMPUTATION OF MANUFACTURING OVERHEADS APPLIED :

Manufacturing overheads applied = direct labor * predetermined overhead rate

                                                         = 1600 * 125% of direct labor cost

                                                          = $ 2000

The amount of manufacturing overheads applied to job in process = $ 2000

COMPUTATION OF DIRECT MATERIAL CHANGED :

direct material changed = job in process - manufacturing overheads applied - direct labor

                                         = 6000 - 2000 - 1600

                                           = $ 2400

the amount of direct material changed to job in process = $ 2400

B) JOURNAL ENTRIES TO THE SUMMARIZED DATA :

1)

DATE	PARTICULARS	L/F	DEBIT	CREDIT
	work in progress a/c dr (18000+12000+15000)		45000
	to direct material a/c			18000
	to direct labor a/c			12000
	to manufacturing overheads a/c			15000
	(being manufacturing costs are changed to the production)

2)

DATE	PARTICULARS	L/F	DEBIT	CREDIT
	finished goods inventory a/c dr		44000
	to work in process inventory a/c			44000
	(being the cost of work in process production completed)

3)

DATE	PARTICULARS	L/F	DEBIT	CREDIT
	cash a/c dr		50000
	to sales a/c			50000
	(being sales made with cash)
	cost of goods sold a/c dr (44000*80%)		35200
	to finished goods inventory a/c			35200
	(being cost of cash sales made)