Powell Company uses a job costing system. During the month of May, Powell spent
ID: 2338910 • Letter: P
Question
Powell Company uses a job costing system. During the month of May, Powell spent most of its time on job A50, which was started late in April. Following is cost information for job A50, other May costs, and relevant annual estimates.
Materials issued:
80% for Direct Use on job A50 and 20% for Indirect Use through May
$
6,000
Labor:
Direct Labor for job A50 (300 DLH @ $20 per DLH)
6,000
Indirect Labor for May
310
Other May Costs:
Depreciation (30% Factory and 70% Administrative)
1,000
Other (70% Factory and 30% Administrative)
700
Overhead Cost Driver: Direct Labor Hours (DLH)
Estimated Annual Overhead
21,000
Estimated Annual DLH
3,000
Markup-as a percent of cost
40
%
Required:
(1) Calculate the pre-determined overhead rate and use it to calculate the overhead to be applied for May to job A50?
(2) What are total manufacturing costs for May for job A50?
(3) Prepare the journal entries to record the events that happened in May, assuming that the May 1 work-in-process inventory for job A50 was $600.
(4) Calculate the under- or over-applied overhead for May and prepare a journal entry to close overapplied or underapplied overhead into cost of goods sold on May 31
Materials issued:
80% for Direct Use on job A50 and 20% for Indirect Use through May
$
6,000
Labor:
Direct Labor for job A50 (300 DLH @ $20 per DLH)
6,000
Indirect Labor for May
310
Other May Costs:
Depreciation (30% Factory and 70% Administrative)
1,000
Other (70% Factory and 30% Administrative)
700
Overhead Cost Driver: Direct Labor Hours (DLH)
Estimated Annual Overhead
21,000
Estimated Annual DLH
3,000
Markup-as a percent of cost
40
%
Explanation / Answer
1 Predetermined overhead Rate Estimated annual overhead / Estimated Annual DLH 21000/3000 $7 per DLH Overhead to be applied 2100 (300*7) 2 Total manufacturing costs for A50 Direct material 4800 Direct labor 6000 Overhead assigned 2100 Total manufacturing costs for A50 12900 Date Account title and Explanation Debit Credit 1 Work in process 4800 Factory overhead 1200 Raw material Inventory 6000 (To record usage of material) 2 Work in process 6000 Factory overhead 310 Wages Payable 6310 (To record usage of labor) 3 Factory overhead 790 Administrative expenses 910 Account Payable/Cash 1700 (To record overhead paid) 4 Work in Process 2100 Factory overhead 2100 (To record factory overhead assigned) Total overhead Incurred 2300 Overhead assigned 2100 Under applied 200 Date Account title and Explanation Debit Credit Cost of goods sold 200 Factory overhead 200 (To adjust overhead)
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