Question

Maria Young is the sole stockholder of Purl of Great Price Company (POGP Company), which produces high-end knitted sweaters and sweater vests for sale to retail outlets. The company started in January of the current year, and employs three knitters (each of whom work 40 hours per week) and one office manager/knitting supervisor (this employee works 20 hours per week as office manager, and 20 hours per week as knitting supervisor). All wages are paid in cash at the end of each month.

Each knitter has a knitting machine that is used about 2/3 of the knitter’s time, the rest of the knitter’s time being involved in hand knitting and piecing together the garments. The company also has a packaging machine used to wrap the garments in plastic for shipping, which is operated by the office manager/knitting supervisor approximately 5 hours per week.

The knitting machines were purchased on January 1 of the current year, and cost $2,400 each, with an anticipated useful life of 10 years and no salvage value. The packaging machine was purchased on the same date and cost $4,800, with the same anticipated useful life and salvage value.

	Required:
1.	Review the data in the Predetermined Factory Overhead Rate panel, and compute the predetermined factory overhead rate for POGP Company.
2.	On December 10, POGP Company receives an order for 200 sweater vests and assigns Job 83 to the order. Review the Materials Requisition panel. A. Journalize the entry to record the addition of the materials to Work in Process.* B. On the Job Cost Sheets panel, add the materials to the Job Cost Sheet for Job 83.
3.	On December 15, review the source documents on the Time Tickets panel. A. Journalize the entry to record the addition of direct labor to Work in Process for the period December 1 through December 15.* B. Journalize the entry to record the addition of factory overhead to Work in Process for the period December 1 through December 15.* C. On the Job Cost Sheets panel, add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 62 for the period December 1 through December 15.
4.	On December 21, Job 62 is completed. Review the Job Cost Sheets panel and your journal entries. Journalize the entry to move the associated costs to the Finished Goods account.*
5.	On December 22, 75 of the 100 sweaters from Job 62 are sold on account for $125 each. Journalize the following transactions:* A. The entry to record the sale. B. The entry to record the transfer of costs from Finished Goods to Cost of Goods Sold.
6.	On December 31, the last work day of the year for the knitters, review the source documents on the Time Tickets panel. A. Journalize the entry to record the addition of direct labor to Work in Process for the period December 16 through December 31.* B. Journalize the entry to record the addition of factory overhead to Work in Process for the period December 16 through December 31.* C. On the Job Cost Sheets panel, add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 83 for the period December 16 through December 31.
7.	On December 31, journalize the following transactions.* Note that expenses (B), (C), and (D) were paid in cash. A. One month’s depreciation on equipment B. One month’s payroll for all employees C. One month’s rent of $2,000 D. One month’s utilities of $1,275
8.	On December 31, prepare the journal entry to dispose of the balance in the Factory Overhead account.*
9.	What are the balances in the following accounts as of December 31? A. Materials B. Work in Process C. Finished Goods D. Factory Overhead E. Cost of Goods Sold *Refer to the Chart of Accounts for exact wording of account titles.

Chart of Accounts

CHART OF ACCOUNTS
POGP Company
General Ledger
ASSETS 110 Cash 112 Accounts Receivable 117 Supplies 118 Materials 119 Work in Process 120 Finished Goods 125 Equipment 126 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 211 Wages Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary	REVENUE 410 Sales EXPENSES 510 Cost of Goods Sold 520 Factory Overhead 525 Wages Expense

Nov. 30 Trial Balance

POGP Company

UNADJUSTED TRIAL BALANCE

November 30, 20Y8

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	20,000.00
2	Accounts Receivable	1,000.00
3	Supplies	200.00
4	Materials	5,000.00
5	Work in Process	5,404.00
6	Equipment	12,000.00
7	Accumulated Depreciation-Equipment		825.00
8	Accounts Payable		150.00
9	Common Stock		10,000.00
10	Retained Earnings		12,000.00
11	Dividends	18,096.00
12	Sales		307,500.00
13	Cost of Goods Sold	255,040.00
14	Factory Overhead		15.00
15	Wages Expense	13,750.00
16	Totals	330,490.00	330,490.00

Predetermined Factory Overhead Rate

Since the company is more reliant on labor than machines, Maria decides to use direct labor hours (DLH) as the activity base for her predetermined factory overhead rate, rather than machine hours (MH).

Estimated Selected Amounts for the Year
Estimated depreciation on equipment		$1,200.00
Estimated total Office Manager/Knitting Supervisor wages		$36,000.00
Estimated office utilities		$3,000.00
Estimated factory utilities		$4,800.00
Estimated factory rent		$24,000.00
Activity Base Data
Estimated number of DLH for the year	5,000
Estimated number of MH for the year	3,500

Calculate the predetermined factory overhead rate for the current year. If required, round your answers to the nearest cent.

Error! Filename not specified.$9.60 per DLH

Materials Requisition

Materials Requisition			Date: Dec. 10
Req. No. 12255	Job No. 83
Description	Qty. Issued	Unit Price	Amount
Yarn type B	600 skeins	$5.00	$3,000
		Total issued	$3,000

Time Tickets

Time Ticket	No. 1255	Name:	Susan Blake
Work Description:	Knitting/piecing
Dates	Job No.	Hours Worked	Unit Price	Amount
12/01-12/15	62	65	$15.00	$975.00
12/16-12/31	83	103	$15.00	$1,545.00
			Total Cost	$2,520.00
Time Ticket	No. 2274	Name:	Josh Porter
Work Description:	Knitting/piecing
Dates	Job No.	Hours Worked	Unit Price	Amount
12/01-12/15	62	75	$15.00	$1,125.00
12/16-12/31	83	88	$15.00	$1,320.00
			Total Cost	$2,445.00

Time Ticket	No. 3923	Name:	Mary Jones
Work Description:	Knitting/piecing
Dates	Job No.	Hours Worked	Unit Price	Amount
12/01-12/15	62	60	$15.00	$900.00
12/16-12/31	83	109	$15.00	$1,635.00
			Total Cost	$2,535.00

Job Cost Sheets

Add the amounts in requirements 2(B), 3(C), and 6(C) to the appropriate areas of the following job cost sheets. If there is no amount or an amount is zero, enter "0". If required, round your answers to the nearest cent.

Job 62	100 units:	Sweaters
	Direct Materials	Direct Labor	Factory Overhead	Total
Balance Dec. 1	$5,000	$300	$104	$5,404
Dec. 15
Total Cost
			Unit Cost
Job 83	200 units:	Sweater vests
	Direct Materials	Direct Labor	Factory Overhead	Total Job Cost
Balance Dec. 1	$0	$0	$0	$0
Dec. 10
Dec. 31
Total Cost

Journal

Journalize the entries in requirements 2 - 8. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 15

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

Final Question

What are the balances in the following accounts as of December 31?

Materials
Work in Process
Finished Goods
Factory Overhead
Cost of Goods Sold

Answer 1

1

computation of the predetermined factory overhead rate for POGP Company.

A

Estimated depreciation on equipment

$1,200.00

B

Estimated total Office Manager/Knitting Supervisor wages

$36,000.00

C

Estimated office utilities

$3,000.00

D

Estimated factory utilities

$4,800.00

E

Estimated factory rent

$24,000.00

F=A+B+C+D+E

Total overhead cost

$69,000.00

G

Estimated durect labor hour

5,000

H=F/G

Predetermined Factory Overhead Rate

$13.80

per Direct Labor Hour

(DLH)

2A

JOURNAL ENTRY

Date

Account Title

Debit

Credit

.December 10

Work in process-Job83

$3,000

Materials

$3,000

(To record issue of Direct Materials to job no. 83)

2B

JOB COST SHEET-JOB NO.83

Job 83

200 units:

Sweater vests

Direct Materials

Direct Labor

Factory Overhead

Total Job Cost

Balance Dec. 1

$0

$0

$0

$0

Dec. 10

$3,000

Dec. 31

Total Cost

3A

JOURNAL ENTRY

Date

Account Title

Debit

Credit

.December15

Work in Process-Job62

$975

Work in Process-Job62

$1,125

Work in Process-Job62

$900

Wages Payable

$3,000

(To record Direct Labor cost )

3B

Date

Account Title

Debit

Credit

.December15

Work in Process-Job62

$2,760

(65+75+60)Hours*$13.80

Factory overhead

$2,760

Job 62

100 units:

Sweaters

Direct Materials

Direct Labor

Factory Overhead

Total

Balance Dec. 1

$5,000

$300

$104

$5,404

Dec. 15

$3,000

$2,760

Total Cost

Unit Cost

4

JOURNAL ENTRY TO MOVE JOB 62 TO FINISHED GOODS

Job 62

100 units:

Sweaters

Direct Materials

Direct Labor

Factory Overhead

Total

Balance Dec. 1

$5,000

$300

$104

$5,404

Dec. 15

$3,000

$2,760

$5,760

Total Cost

$11,164

Unit Cost

$111.64

JOURNAL ENTRY

Date

Account Title

Debit

Credit

.December21

Work in process-Job62

$11,164

Finished Goods

$11,164