Question

Burlington Clock Works manufactures fine, handcrafted clocks. The firm uses a job-order costing system, and manufacturing overhead is applied on the basis of direct-labor hours. Estimated manufacturing overhead for the year is $240,000. The firm employs 10 master clockmakers, who constitute the direct-labor force. Each of these employees is expected to work 2,000 hours during the year, which represents each employee’s practical capacity. The following events occurred during October.

a. The firm purchased 3,000 board feet of mahogany veneer at $11 per board foot.

b. Twenty brass counterweights were requisitioned for production. Each weight cost $23.

c. Five gallons of glue were requisitioned for production. The glue cost $20 per gallon. Glue is treated as an indirect material.

d. Depreciation on the clockworks building for October was $8,000.

e. A $400 utility bill was paid in cash.

f. Time cards showed the following usage of labor:

   Job number G60: 12 grandfather’s clocks, 1,000 hours of direct labor

   Job number C81: 20 cuckoo clocks, 700 hours of direct labor

   The master clockmakers (direct-labor personnel) earn $20 per hour.

g. The October property tax bill for $910 was received but has not yet been paid in cash.

h. The firm employs laborers who perform various tasks such as material handling and shop cleanup. Their wages for October amounted to $2,500.

i. Job number G60, which was started in July, was finished in October. The total cost of the job was $14,400.

j. Nine of the grandfather’s clocks from job number G60 were sold in October for $1,500 each.

Prepare journal entries to record the events described above

Answer 1

Transaction	General Journal	Debit	Credit
a.	Raw materials inventory (Mahogany veneer)	33000
	Cash/Accounts payable (3000 x $11)		33000
	(To record purchase on account)
b.	Work in process inventory (20 x $23)	460
	Raw materials inventory (brass weights)		460
	(To record brass weights transferred to production)
c.	Manufacturing overhead (5 x $20)	100
	Raw materials inventory (glue)		100
	(To record glue transferred to production)
d.	Manufacturing overhead	8000
	Accumulated depreciation-building		8000
	(To record depreciation on clockworks building)
e.	Manufacturing overhead	400
	Cash		400
	(To record utility bill paid in cash)
f(1).	Work in process inventory-Job G60 (1000 x $20)	20000
	Work in process inventory-Job C81 (700 x $20)	14000
	Wages payable		34000
	(To record direct labor cost incurred)
f(2).	Work in process inventory-Job G60 (1000 x $12)	12000
	Work in process inventory-Job C81 (700 x $12)	8400
	Manufacturing overhead		20400
	(To record manufacturing overhead applied to production)
g.	Manufacturing overhead	910
	Accounts payable		910
	(To record property taxes bill)
h.	Manufacturing overhead	2500
	Wages payable		2500
	(To record indirect wages incurred)
i.	Finished goods inventory	14400
	Work in process inventory		14400
	(To record transfer of job cost to finished goods inventory)
j(1).	Cash/Accounts receivable	13500
	Sales revenue (9 x $1500)		13500
	(To record sales)
j(2).	Cost of goods sold (9 x $14400/12)	10800
	Finished goods inventory		10800
	(To record cost of sales)

Estimated manufacturing overhead rate = $240000/(10 x 2000 hours) = $240000/20000 = $12 per direct labor hour