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.

A) Purchased raw materials on credit, $240,000.

B) Materials requisitions record use of the following materials for the month.

Job 136	$	49,500
Job 137		32,500
Job 138		19,600
Job 139		23,000
Job 140		6,400
Total direct materials		131,000
Indirect materials		21,000
Total materials used	$	152,000

C) Paid $15,250 cash to a computer consultant to reprogram factory equipment.

D) Time tickets record use of the following labor for the month. These wages were paid in cash.

Job 136	$	12,100
Job 137		10,700
Job 138		38,100
Job 139		39,400
Job 140		3,800
Total direct labor		104,100
Indirect labor		26,500
Total	$	130,600

E) Applied overhead to Jobs 136, 138, and 139.

F) Transferred Jobs 136, 138, and 139 to Finished Goods.

G) Sold Jobs 136 and 138 on credit at a total price of $530,000.

H) 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		10,000
Accrued property taxes payable		36,500

i) 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

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Date	Account	Debit	Credit
May	Raw Material Inventory	240000
May	Accounts Payable		240000
	(Purchase of Raw Material)
May	Work in Process Inventory	131000
May	Manufacturing Overhead	21000
May	Raw Material Inventory		152000
	(Requisition of direct and indirect mat)
May	Manufacturing Overhead	15250
May	Cash		15250
May	Work in Process Inventory	104100
May	Manufacturing Overhead	26500
May	Cash		130600
	(being labor cost recorded - direct and indirect)
May	Work in Process Inventory (12100+38100+39400)*200%	179200
May	Manufacturing Overhead		179200
May	Finished Goods Inventory (85800+133900+141200)	360900
May	Work in Process Inventory		360900
May	Accounts Receivable	530000
May	Sale		530000
May	Manufacturing Overhead	153500
May	Accumulated Depreciation-Building		70000
May	Accumulated Depreciation-Equipment		37000
May	Prepaid Insurance		10000
May	Property Tax Payable		36500
May	Work in Process Inventory (3800+10700)*200%	29000
May	Manufacturing Overhead		29000
	(Overhead applied)
	(Predetermined Overhead Rate*Allocation Base)
May	Cost of goods sold (85800+133900)	219700
May	Finished Goods Inventory		219700

Raw Material
Debit		Credit
	240000		152000
Ending	88000
Work in Process
Debit		Credit
	131000		360900
	104100
	179200
	29000
Ending	82400
Finished Goods
Debit		Credit
	360900		219700
Ending	141200
Manufacturing Overhead
Debit		Credit
	21000		179200
	15250		29000
	26500
	153500
Underapplied	8050
Cost of Goods Sold
Debit		Credit
	219700
	219700

Job Cost Sheet for Job No 136
	Direct Material	Direct Labor			Manufaturing Overhead
		Hours	Rate	Amount	Hours	Rate	Amount
Date May	49500
Date May				12100
Date May							24200
Cost Summary			Units Shipped
Direct Material	49500		Date	No	Balance
Direct Labor	12100
Manufacturing Overhead	24200
Total Product Cost	85800
Unit Product Cost	85800
Job Cost Sheet for Job No 137
	Direct Material	Direct Labor			Manufaturing Overhead
		Hours	Rate	Amount	Hours	Rate	Amount
Date May	32500
Date May				10700
Date May							21400
Cost Summary			Units Shipped
Direct Material	32500		Date	No	Balance
Direct Labor	10700
Manufacturing Overhead	21400
Total Product Cost	64600
Unit Product Cost	64600
Job Cost Sheet for Job No 138
	Direct Material	Direct Labor			Manufaturing Overhead
		Hours	Rate	Amount	Hours	Rate	Amount
Date May	19600
Date May				38100
Date May							76200
Cost Summary			Units Shipped
Direct Material	19600		Date	No	Balance
Direct Labor	38100
Manufacturing Overhead	76200
Total Product Cost	133900
Unit Product Cost	133900
Job Cost Sheet for Job No 139
	Direct Material	Direct Labor			Manufaturing Overhead
		Hours	Rate	Amount	Hours	Rate	Amount
Date May	23000
Date May				39400
Date May							78800
Cost Summary			Units Shipped
Direct Material	23000		Date	No	Balance
Direct Labor	39400
Manufacturing Overhead	78800
Total Product Cost	141200
Unit Product Cost	141200
Job Cost Sheet for Job No 140
	Direct Material	Direct Labor			Manufaturing Overhead
		Hours	Rate	Amount	Hours	Rate	Amount
Date May	6400
Date May				3800
Date May							7600
Cost Summary			Units Shipped
Direct Material	6400		Date	No	Balance
Direct Labor	3800
Manufacturing Overhead	7600
Total Product Cost	17800
Unit Product Cost	17800

From cost sheet of 137 and 140, it can be seen that total cost 82400 is equal to WIP account balance.