Question

The University of

BostonBoston

Press is wholly owned by the university. It performs the bulk of its work for other university​ departments, which pay as though the press were an outside business enterprise. The press also publishes and maintains a stock of books for general sale. The press uses normal costing to cost each job. Its​ job-costing system has two​ direct-cost categories​ (direct materials and direct manufacturing​ labor) and one​ indirect-cost pool​ (manufacturing overhead, allocated on the basis of direct manufacturing labor​ costs). The following data​ (in thousands) pertain to 2017:

Direct materials and supplies purchased on credit $840

Direct materials used 740

Indirect materials issued to various production departments 140

Direct manufacturing labor 1,350

Indirect manufacturing labor incurred by various production departments 950

Depreciation on building and manufacturing equipment 440

Miscellaneous manufacturing overhead* incurred by various production departments

(ordinarily would be detailed as repairs, photocopying, utilities, etc.) 540

Manufacturing overhead allocated at 170% of direct manufacturing labor costs ?

Cost of goods manufactured 4,130

Revenues 8,900

Cost of goods sold (before adjustment for under- or overallocated manufacturing overhead) 4,050

Inventories, December 31, 2016 (not 2017):

Materials Control 160

Work-in-Process Control 60

Finished Goods Control 530

*The term manufacturing overhead is not used uniformly. Other terms that are often encountered in printing companies include job overhead and shop overhead.

1.	Identify the components of the overview diagram of the​ job-costing system at the University of Boston Press.
2.	Prepare journal entries to summarize the 2017 transactions. As your final​entry, dispose of the​ year-end under- or overallocated manufacturing overhead as a​ write-off to Cost of Goods Sold. Number your entries. Explanations for each entry may be omitted.
3.	Show posted​ T-accounts for all​ inventories, Cost of Goods​ Sold, Manufacturing Overhead​ Control, and Manufacturing Overhead Allocated.
4.	How did the University of Boston Press perform in 2017​?

Answer 1

					Dr.	Cr.
1	Materials Inventory Control				840
	Accounts Payable Control					840
	To record purchase of direct materials & supplies.
2	Work-in-Process Inventory Control				740
	Manufacturing Overhead Control				140
	Materials Inventory Control					880
	To record direct materials and supplies used.
3	Work-in-Process Inventory Control				1,350
	Manufacturing Overhead Control				950
	Wages Payable					2,300
	To record manufacturing labor.
4	Manufacturing Overhead Control				440
	Accumulated Depreciation -- Building and Manufacturing Equipment					440
	To record depreciation of building and manufacturing equipment
5	Manufacturing Overhead Control				540
	miscellaneous accounts					540
	To record miscellaneous factory overhead.
6	Work-in-Process Inventory Control				2,295
	Applied Manufacturing Overhead					2,295
	To assign manufacturing overhead   to WIP based on DML dollars.
	($1,350 X 170%)
7	Finished Goods Inventory Control				4,130
	Work-in-Process Inventory Control					4,130
	To record the cost of goods manufactured.
8	Accounts Receivable Control or Cash				8,900
	Sales Revenues					8,900
	To record sales revenue.
9	Cost of Goods Sold				4,050
	Finished Goods Inventory Control					4,050
	To record the costs of the goods sold
10	Applied Manufacturing Overhead				2,295
	Manufactured Overhead Control					2,070
	Cost of Goods Sold					225
	To adjust for the over application of manufacturing overhead.
					26,670	26,670

Materials Inventory Control
BOY	160
J/E #1	840
		880	J/E #2
EOY	120
Work-in-Process Inventory Control
BOY	60
J/E #2	740
J/E #3	1,350
J/E #6	2,295
		4,130	J/E #7
EOY	315
Finished Goods Inventory Control
BOY	530
J/E #7	4,130
		4,050	J/E #9
EOY	610
Manufacturing Overhead Control
BOY	0
J/E #2	140
J/E #3	950
J/E #4	440
J/E #5	550
		2,070	J/E #10
EOY	10
Applied Manufacturing Overhead
BOY	0
		2,295	J/E #6
J/E #10	2,295
EOY	0
Cost of Good Sold
BOY	0
J/E #9	4,050
		225	J/E #10
EOY	3,825

a. Gross margin.
Sales			$8,900
Less Cost of Goods Sold			3,825
Gross Margin			$5,075	57.02%
The gross margin percentage of over 51% is quite good. In general, GM ratios above 30% are considered good
b. The company did a good job of estimating MOH. Overhead was overapplied by   only $130 or about 6.7% (130/1,950).