Question

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March—Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):

Estimated total fixed manufacturing overhead	$	14,400
Estimated variable manufacturing overhead per direct labor-hour	$	1.50
Estimated total direct labor-hours to be worked		3,600
Total actual manufacturing overhead costs incurred	$	19,500

	Job P		Job Q
Direct materials	$	15,000	$	9,600
Direct labor cost	$	40,500	$	12,000
Actual direct labor-hours worked		2,700		800
1. Prepare a completed Work in Process T-account including the beginning and ending balances and all debits and credits posted to the account. 2. Prepare a schedule of cost of goods sold 3. Prepare the journal entry to transfer costs from Finished Goods to Cost of Goods Sold.

4.

Assume that Job P includes 35 units that each sell for $2,600 and that the company’s selling and administrative expenses in March were $13,000. Prepare an absorption costing income statement for March.

Answer 1

	A	Estimated Total Direct labor hours	3600
	B=A*1.5	Estimated variable overhead	$          5,400
	C	Estimated Fixed overhead	$14,400
	D=B+C	Total estimted overhead cost	$        19,800
	E=D/A	Plantwide overhead rate	$            5.50	per hour
	1	T-ACCOUNT
		WORK IN PROCESS
		Description	Debit	Credit
		Beginning balance	$0
		Direct Material -P	$15,000
		Direct Material -Q	$9,600
		Direct Labor-P	$40,500
		Direct Labor-Q	$12,000
		Applied Overhead-P	$        14,850		(2700*5.5)
		Applied Overhead-Q	$          4,400		(800*5.5)
		Transfer to Finished goods		$70,350	(15000+40500+14850)
		Ending Balance	$26,000
	2	SCHEDULE OF COST OF GOODS SOLD
		Direct Material	$15,000
		Direct Labor	$40,500
		Variable Overhead	$          4,050	(1.5*2700)
		Fixed overhead	$        10,800	(5.5-1.5)*2700
		Under applied overhead	$              250	(19500-14850-4400)
		Cost of goods sold	$70,600
	3	JOURNAL ENTRY
		Account Title	Debit	Credit
		Finished goods inventory	$70,350
		Work in process		$70,350
	4	INCOME STATEMENT
		For the month of March
		Sales	$        91,000	(35*26000
		Cost of goods sold	$70,600
		Gross Profit	$        20,400
		Selling and administrative expenses	$13,000
		Operating Income	$          7,400