Question

Job Cost Journal Entries

Prior to the beginning of 2016, Stapleton Company estimated that it would incur $153,000 of manufacturing overhead cost during 2016, using 17,000 direct labor hours to produce the desired volume of goods. On January 1, 2016, beginning balances of Materials Inventory, Work in Process Inventory, and Finished Goods Inventory were $48,000, $-0-, and $87,000, respectively.

Required

Prepare general journal entries to record the following for 2016:

A. Purchased materials on account, $316,000.

Material inventory 316000

Accounts payable 316000

B. Of the total dollar value of materials used, $284,000 represented direct material and $35,000 indirect material.

Work in process inventory 284000

Manufacturing overhead                             35000

Materials inventory 319000

C.Determined total factory labor, $189,000 (18,000 hrs. @ $10.50/hr.).

D.Of the factory labor, 15,800 were direct labor hours.

                                                                                Debit                                    Credit

Work in process inventory 165900

Manufacturing overhead 23100

Wages payable 319000

E.Applied manufacturing overhead based on direct labor hours to work in process.

                                                                                Debit                                    Credit

  Work in process inventory                            ?

        Material inventory                                                                               ?

F.Determined actual manufacturing overhead other than those items already recorded, $83,000. (Credit Accounts Payable.)

                                                                                Debit                                    Credit

Manufacturing overhead ?

Accounts payable ?

G.Ending inventories of work in process and finished goods were $57,000 and $71,800, respectively. Determine the cost of finished goods (credit WIP) and the cost of goods sold (credit FG inventory). Make separate entries.

Debit                                    Credit

Manufacturing overhead ?

Work in process inventory ?

H.Transferred the balance in Manufacturing Overhead to Cost of Goods Sold.

                                                                 Debit                                    Credit

       Manufacturing overhead                                ?

              Cost of good sold ?

Answer 1

Solution:

Journal Entry

Event	General Journal	Debit	Credit
A.	Materials Inventory	$316,000
	Accounts payable		$316,000
B.	Work In Process Inventory	$284,000
	Manufacturing Overhead	$35,000
	Materials Inventory		$319,000
C&D	Work In Process Inventory (15,800 hrs x $10.50)	$165,900
	Manufacturing Overhead (bal fig)	$153,100
	Wages Payable		$319,000
E	Work IN Process Inventory (Applied MF OH Refer Note 1)	$142,200
	Manufacturing Overhead		$142,200
F.	Manufacturing Overhead	$83,000
	Accounts Payable		$83,000
G.	Finished Goods Inventory	$535,100
	Work In Process Inventory		$535,100
	Cost of Goods Sold (refer note 3)	$550,300
	Finished Goods Inventory		$550,300
H.	Manufacturing Overhead (Refer note 4)	$1,100
	Cost of Goods Sold		$1,100

Note 1 ---

Applied Manufacturing Overhead = Actual direct labor hours used x Predetermined Overhead Rate

Predetermined Overhead Rate = Total Estimated Manufacturing Overhead / Total Estimated Allocation base i.e. Direct Labor Hours

= $153,000 / 17,000 DLHs

= $9 per DLH

Applied Manufacturing Overhead = Actual direct labor hours used 15,800 hrs x Predetermined Overhead Rate $9

= $142,200

Note 2

	$$
Work In Process Beginning Inventory	$0
Plus: Direct materials cost	$284,000
Plus: Direct Labor Cost	$165,900
Plus: Applied Manufacturing OH	$142,200
Total Manufacturing Cost	$592,100
Less: Ending Work In Process Inventory	-$57,000
Cost of Goods manufactured	$535,100

Note 3

Cost of Goods Sold = Beginning Finished Goods Inventory + Transferred from Work in Process – Ending Finished Goods Inventory

= $87,000 + $535,100 - $71,800

= $550,300

Note 4 – calculation of over or under applied manufacturing overhead

Applied Manufacturing Overheads = $142,200

Manufacturing Overhead Incurred = Indirect material $35,000 + Indirect Labor $23,100 + Other MFR OH $83,000

= $141,100

Applied Overheads are higher than actual overheads incurred, it means Overheads are OVER APPLIED by $1,100 (142,200 – 141,100)

So we need to Debit Manufacturing Overhead Account and Credit Cost of Goods Sold Account to end this over applied overhead.

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