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Maria Young is the sole stockholder of Purl of Great Price Company (POGP Company), which produces...

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

Solutions

Expert Solution

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

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