Comprehensive Birmingham Contractors uses a job order costing system. In May 201
ID: 2376209 • Letter: C
Question
Comprehensive
Birmingham Contractors uses a job order costing system. In May 2013, the company made a $3,300,000 bid to build a pedestrian overpass over the beach highway at Gulf Shores, Alabama. Birmingham Contractors won the bid and assigned #515 to the project. Its completion date was set at December 15, 2013. The following costs were estimated for completion of the overpass: $1,240,000 for direct material, $670,000 for direct labor, and $402,000 for overhead.
During July, Birmingham Contractors completed several jobs that had been in process before the beginning of the month. These completed jobs sold for $1,224,000, and payment will be made to the company in August. The related job cost sheets showed costs associated with those jobs of $829,000. At the beginning of July, Birmingham Contractors had Work in Process Inventory of $871,800.
a. Enter the following summary amounts that would appear on a job order cost sheet for Job #515 for July.
b. Journalize the September transactions. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".
To record material requisitions.
Set up T accounts with balances as given.
Debits = Credits
Assets = Liabilities + Owner%u2019s Equity
Record transfers of direct materials to the Work in Process (assets) accounts from the materials account.
To record salaries and wages.
Actual BudgetDirect material $ $ Direct labor $ $ Overhead $ $ Totals $ $
Explanation / Answer
a) Job Order Cost Sheet
Job No. 515
Customer Name: Gulf Shores, Alabama
Job Description: Pedestrian Overpass
Date Promised: 12-15-10 Date Started: 7-1-10 Date Completed:
Direct Materials: July 1 $121,800
Direct Labor: July 1 $175,050
Manufacturing Overhead: July 1 $105,024
b) Journal Entries
DR: Work in process - $579,300
CR: Raw materials inventory- 579,300
DR:Work in process- 584,000
CR: Wages payable - 584,000
DR: Manufacturing overhead - 55,800
CR: Wages payable - 55,800
DR: Wage expense - 39,600
CR: Wages payable - 39,600
DR: Manufacturing overhead - 26,400
CR: Accumulated depreciation (constuction equipment) - 26,400
DR: Depreciation expense - 7,800
CR: Accumulated dep'n (office equipment) - 7,800
DR: Entertainment expense - 11,100
CR: Accounts payable - 11,100
DR: Advertising expense- 6,600
CR: Cash - 6,600
DR: Manufacturing overhead - 18,600
CR: Supplies - 18,600
DR: Misc Expense - 10,200
CR: Misc Expense payable - 10,200
DR:Utility expense - 1,800
DR: Manufacturing overhead - 5,400
CR: Utilities payable - 7,200
DR: Accounts receivable - 1,224,000
CR: Sales - 1,224,000
DR: Cost of goods sold: 829,000
CR: Finished goods: 829,000
c) Cost of Goods Manufactured
Beginning work in process: 871,800
Add:
Direct materials used: 579,300
Direct labor: 584,000
Total manufacturing overhead: 106,200
Total manufacturing costs to account for: 2,141,300
Less: Ending work in process: 1,312,300
Cost of goods manufactured: 829,000
d) Income Statement
Sales reveunue: $1,224,000
Less cost of goods sold: 829,000
Gross profit: 395,000
Less operating expenses:
Wage exp - 39,600
Dep'n exp - 7,800
Entertainment exp - 11,100
Advertising exp - 6,600
Misc exp - 10,200
Utility exp - 1,800
Total operating expenses: 77,100
Operating income: 317,900
Income tax: 127,160
Net income: 190,740
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