Question

The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.

	April 30				May 31
Inventories
Raw materials	$	30,000			$	54,000
Work in process		9,200				21,000
Finished goods		60,000				34,800
Activities and information for May
Raw materials purchases (paid with cash)						181,000
Factory payroll (paid with cash)						250,000
Factory overhead
Indirect materials						11,000
Indirect labor						57,500
Other overhead costs						95,500
Sales (received in cash)						1,200,000
Predetermined overhead rate based on direct labor cost						55	%

1. Incurred other overhead costs (record credit to Other Accounts).
2. Applied overhead to work in process.

Prepare journal entries for the above transactions for the month of May.

Answer 1

Computations:

1. Cost of direct materials used –

Purchases        181,000

Add: beg. Balance      30,000

Cost of available materials 211,000

Less: ending balance 54,000

Total direct materials used 157,000

Less: indirect materials 11,000

Cost of direct materials used $146,000

2. Cost of direct labor –

Factory wages paid $250,000

Less: indirect factory wages 57,500

Cost of direct wages paid $192,500

3. Factory overhead applied = 55% x direct labor cost

= 55% x 192,500 = $105,875

4. Actual factory overhead cost –

Indirect materials 11,000

Indirect labor 57,500

Other costs 95,500

Total   164,000

Less: applied overhead 105,875

Underapplied factory overhead $58,125

5. Cost of goods manufactured -

Work in process –

Beg. Balance $9,200

Add: direct materials used 146,000

Direct labor 192,500

Factory overhead applied 105,875

Total $453,575

Less: ending balance $21,000

Cost of goods manufactured $432,575

6. Cost of goods sold –

Cost of goods manufactured $432,575

Add: beg. Finished goods $60,000

Cost of goods available for sale $492,575

Less: ending finished goods $34,800

Cost of goods sold $457,775

Add: underapplied overhead $58,125

Cost of goods sold $515,900