Exercise 3-10 Applying Overhead; Journal Entries; T-accounts [LO3-1, LO3-2] Dill
ID: 2335976 • Letter: E
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Exercise 3-10 Applying Overhead; Journal Entries; T-accounts [LO3-1, LO3-2] Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,248,400 in manufacturing overhead cost at an activity level of 559,000 machine-hours. The company spent the entire month of January working on a large order for 12,500 custom-made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow a. Raw materials purchased on account, $325,000. b. Raw materials used in production, $265,000(80% direct materials and 20% indirect materials). c. Labor cost accrued in the factory, $177,000 (one-third direct labor and two-thirds indirect labor) d. Depreciation recorded on factory equipment, $63,800 e. Other manufacturing overhead costs incurred on account, $84,700. f. Manufacturing overhead cost was applied to production on the basis of 40,870 machine-hours actually worked during the month. g. The completed job for 12,500 custom-made machined parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.) Required: 1. Prepare journal entries to record items (a) through () above [ignore item (g) for the moment]. 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T- accounts. 3. Prepare a journal entry for item (g) above. 4. If 10,800 of the custom-made machined parts are shipped to the customer in February, how much of this job's cost will be included in cost of goods sold for February?Explanation / Answer
Answer 1 & 3. Journal Entry Date Particulars Dr. Amt. Cr. Amt. a. Raw Material 325,000.00 Accounts Payable 325,000.00 (To record the raw material purchased) b. Work in Process ($265,000 X 80%) 212,000.00 Manufacturing Overhead ($265,000 X 20%) 53,000.00 Raw Materials 265,000.00 (To record the raw material issued) c. Work in Process ($177,000 X 1/3) 59,000.00 Manufacturing Overhead ($177,000 X 2/3) 118,000.00 Wages & Salaries Payable 177,000.00 (To record the Labor used) d. Manufacturing Expenses 63,800.00 Accumulated Dep. - Factory Equip. 63,800.00 (To record the depreciation on plant) e Manufacturing Overhead 84,700.00 Accounts Payable 84,700.00 (To record the other MOH) f Work in Process 310,612.00 Manufacturing Overhead 310,612.00 (To record the manufacturing overhead applied) Predetermined Overhead Rate = $4,248,400 (Overhead) / 559,000 Mach Hrs Predetermined Overhead Rate = $7.60 per mach hr Overhead Applied = 40,870 Mach Hrs X $7.60 = $310,612 g Finished Goods 581,612.00 Work in Process 581,612.00 (To record the finished goods) Answer 2. Raw Material Work in Process Beg. Bal. - 265,000.00 b. Beg. Bal. - 581,612.00 g a. 325,000.00 b. 212,000.00 c. 59,000.00 f 310,612.00 End. Bal. 60,000.00 End. Bal. - Finished Goods Manufacturing Overhead Beg. Bal. - Beg. Bal. - 310,612.00 f g 581,612.00 b. 53,000.00 8,888.00 Overhead underapplied c. 118,000.00 d. 63,800.00 e 84,700.00 End. Bal. 581,612.00 End. Bal. - Answer 4. Cost per Unit = $581,612 / 12,500 Mach. Parts Cost per Unit = $46.53 per Unit Cost of Goods Sold - 10,800 Units = $46.53 X 10,800 Units Cost of Goods Sold - 10,800 Units = $502,512.77 or say $502,513 (apprx.)
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