Question

SOUTH DAKOTA CORPORATION(2-3)

SOUTH DAKOTA CORPORATION uses a job-order costing system with normal costing. At the start of the period, the company had the following balances:

Raw Materials inventory		$ 2,500
Work in process inventory		-
Finished goods inventory		27,400

At the start of the period, only Job Alpha was in finished goods.

During the month of February, the following transactions occurred:

Purchased raw materials on account for $24,500.

Requisitioned $23,000 of materials for use in production. Of the total, $9,000 was for Job Beta, $8,500 for Job Gamma and the remainder for Job Sigma.

Direct labor incurred for the month was $36,000. The average wage rate is $20 per hour. Direct labor was used for jobs as follows:

Job Beta – 800 hours

Job Gamma – 600 hours

Job Sigma – 400 hours

Actual overhead incurred for the period was $17,900 (credit various payables).

The company applied overhead to production at the rate of $10.00 per direct labor hour.

Job Beta and Job Gamma were completed during the period and transferred to finished goods.

Sold Job Alpha and Job Beta to their respective customers on account at cost plus 40%.

REQUIRED:

Prepare all journal entries for items a) through g)

Purchase                               $24,500

Account payable                              $24,500

Post all job costs to simplified job-cost sheets.

Post summary job-cost information and other transactions to T-accounts as appropriate.

Compute the ending raw materials, work in process and finished goods inventories.

Compute any misapplied overhead and journalize

Compute sales, cost of sales and gross profit as shown on the Income Statement.

Answer 1

Information as shown in the Income Statement

1. Cost of goods sold =$60,300

2. Sales =$84,560

3. Gross Profit = $24,260

Working:

Calculation of Gross Profit
Unadjusted cost of goods sold	60400
Adjustment for overapplied overhead	-100
Adjusted cost of goods sold	60300
Sales Value	84560
Gross Profit	24260

SOUTH DACOTA CORPORATION
General Journal for the month of February
Ref	Account Title	Debit	Credit
a	Raw Material	24500
	Accounts Payable		24500
	(Purchase of raw material on account)
b	Work in process	23000
	Raw Material		23000
	(Requisition of material for production)
c	Wages expense	36000
	Wages payable		36000
	(Wages expense for the month)
d	Work in process	36000
	Wages expense		36000
	(Wages expense assigned to production)
e	Manufacturing overhead	17900
	Various payables		17900
	(Manufacturing overhead incurred during the month)
f	Work in process *	18000
	Manufacturing overhead		18000
	(Overhead applied @$10 per hour on 1,800 labor hours)
g	Finished goods **	59500
	Work in process		59500
	(Transfer of finished jobs to finished goods )
h	Cost of goods sold ***	60400
	Finished goods		60400
	(Cost of jobs Alpha and Beta transferred to cost of goods sold)
i	Sales ****	84560
	Accounts Receivable		84560
	(Sale of jobs Alpha and Beta at cost plus 40%)
j	Manufacturing overhead	100
	Cost of goods sold		100
	(Overhead overapplied adjusted )
	* overheads applied
	Direct labor hours
	Job Beta	800
	Job Gamma	600
	Job Sigma	400
	Total direct labor hours	1800
	Overheads applied      @$10 per hours	18000
	** Goods transferred to finished goods:
	Cost of Job Beta	33000
	Cost of Job Gamma	26500
	Cost transferred to finished goods	59500
	*** Cost of goods sold
	Cost of Job Alpha	27400
	Cost of Job Beta	33000
	Cost of goods sold	60400
	**** Sales Value
	Goods sold at cost plus 40%
	Cost of the jobs sold	60400
	40% mark up	24160
	Sale Value	84560

T - accounts
Raw Material					Work-in-porcess
Ref	Debit	Credit	Ref		Ref	Debit	Credit	Ref
Beg.Bal.	2500	23000	b		Beg.Bal.	0	59500	g
a	24500	4000	End.Bal.		b	23000	17500	End.Bal.
					d	36000
					f	18000
	27000	27000				77000	77000
Beg.Bal.	4000				Beg.Bal.	17500
Finished Goods					Manufacturing Overhead
Ref	Debit	Credit	Ref		Ref	Debit	Credit	Ref
Beg.Bal.	27400	60400	h		e	17900	18000	f
g	59500	26500	End.Bal.		j	100
	86900	86900				18000	18000
Beg.Bal.	26500				Beg.Bal.	100
Cost of goods sold					Sales
Ref	Debit	Credit	Ref		Ref	Debit	Credit	Ref
h	60400	100	j				84560	i
Accounts Payable					Wages Expense
Ref	Debit	Credit	Ref		Ref	Debit	Credit	Ref
		24500	a		c	36000	36000	d
Wages Payable					Various Payable
Ref	Debit	Credit	Ref		Ref	Debit	Credit	Ref
		36000	c				17900	e
Accounts Receivable
Ref	Debit	Credit	Ref
i	84560

Job Cost Sheets
Job : Beta
Ref	Debit	Ref	Credit
b	9000	g	33000
c	16000
f	8000
	33000		33000
Job : Gamma
		Ref	Credit
b	8500	g	26500
c	12000
f	6000
	26500		26500
Job : Sigma
		Ref	Credit
b	5500
d	8000
f	4000
	17500