Question

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead costs to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,327,500 in manufacturing overhead cost at an activity level of 577,000 machine-hours.

The company spent the entire month of January working on a large order for 9,000 custom made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:

  

a.	Raw materials purchased on account, $317,000.
b.	Raw materials requisitioned for production, $262,000 (80% direct and 20% indirect).
c.	Labor cost incurred in the factory, $153,000, of which $51,000 was direct labor and $102,000 was indirect labor.
d.	Depreciation recorded on factory equipment, $63,600.
e.	Other manufacturing overhead costs incurred, $85,500 (credit Accounts Payable).
f.	Manufacturing overhead cost was applied to production on the basis of 40,640 machine-hours actually worked during the month.
g.	The completed job was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)

  

Required:
1.	Prepare journal entries to record items (a) through (f) above. [Ignore item (g) for the moment.] (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

         

2.	Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts. (Do not round intermediate calculations.)

    

3.	Prepare a journal entry for item (g) above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

         

4.	Compute the unit product cost that will appear on the job cost sheet. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

      

Answer 1

Answer 1 & 3.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
a.	Raw Material	317,000.00
	Accounts Payable		317,000.00
	(To record the raw material purchased)
b.	Work in Process	209,600.00
	Manufacturing Overhead	52,400.00
	Raw Materials		262,000.00
	(To record the raw material issued)
c.	Work in Process	51,000.00
	Manufacturing Overhead	102,000.00
	Wages & Salaries Payable		153,000.00
	(To record the Labor used)
d.	Manufacturing Expenses	63,600.00
	Accumulated Dep. - Factory Equip.		63,600.00
	(To record the depreciation on plant)
e	Manufacturing Overhead	85,500.00
	Accounts Payable		85,500.00
	(To record the other MOH)
f	Work in Process	304,800.00
	Manufacturing Overhead		304,800.00
	(To record the manufacturing overhead applied)
Predetermined Overhead Rate = $4,327,500 (Overhead) / 577,000 Mach Hrs
Predetermined Overhead Rate = $7.50 per mach hr
Overhead Applied = 40,640 Mach Hrs X $7.50 = $304,800
g	Finished Goods                                    Dr.	565,400.00
	To Work in Process		565,400.00

Answer 2.
Raw Material					Work in Process
Beg. Bal.	-	262,000.00	b.		Beg. Bal.	-	565,400.00	g
a.	317,000.00				b.	209,600.00
					c.	51,000.00
					f	304,800.00
End. Bal.	55,000.00				End. Bal.	-
Finished Goods					Manufacturing Overhead
Beg. Bal.	-				Beg. Bal.	-	304,800.00	f
g	565,400.00				b.	52,400.00
					c.	102,000.00
					d.	63,600.00
					e	85,500.00
					Overhead Overapplied	1,300.00
End. Bal.	565,400.00				End. Bal.	-

Answer 4.
Cost per Unit = $565,400 / 9,000 Mach. Parts
Cost per Unit = $64 per Unit