Widmer Watercraft’s predetermined overhead rate for the year 2017 is 200% of dir

Question

Widmer Watercraft’s predetermined overhead rate for the year 2017 is 200% of direct labor. Information on the company’s production activities during May 2017 follows.

A) Purchased raw materials on credit, $240,000.

B) Materials requisitions record use of the following materials for the month.

131,000

C) Paid $15,250 cash to a computer consultant to reprogram factory equipment.

D) Time tickets record use of the following labor for the month. These wages were paid in cash.

E) Applied overhead to Jobs 136, 138, and 139.

F) Transferred Jobs 136, 138, and 139 to Finished Goods.

G) Sold Jobs 136 and 138 on credit at a total price of $530,000.

H) The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).

i) Applied overhead at month-end to the Work in Process Inventory account (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.

1. Prepare a job cost sheet for each job worked on during the month.

2. Prepare journal entries to record the events and transactions a through i

3. Post the journal entries for the transactions to the following T-accounts, each of which started the month with a zero balance.
4. Prepare a report showing the total cost of each job in process and prove that the sum of their costs equals the Work in Process Inventory account balance. Prepare similar reports for Finished Goods Inventory and Cost of Goods Sold.

Job 136 $ 49,500 Job 137 32,500 Job 138 19,600 Job 139 23,000 Job 140 6,400 Total direct materials

131,000

Indirect materials 21,000 Total materials used $ 152,000

Explanation / Answer

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From cost sheet of 137 and 140, it can be seen that total cost 82400 is equal to WIP account balance.

Date Account Debit Credit May Raw Material Inventory 240000 May Accounts Payable 240000 (Purchase of Raw Material) May Work in Process Inventory 131000 May Manufacturing Overhead 21000 May Raw Material Inventory 152000 (Requisition of direct and indirect mat) May Manufacturing Overhead 15250 May Cash 15250 May Work in Process Inventory 104100 May Manufacturing Overhead 26500 May Cash 130600 (being labor cost recorded - direct and indirect) May Work in Process Inventory (12100+38100+39400)*200% 179200 May Manufacturing Overhead 179200 May Finished Goods Inventory (85800+133900+141200) 360900 May Work in Process Inventory 360900 May Accounts Receivable 530000 May Sale 530000 May Manufacturing Overhead 153500 May Accumulated Depreciation-Building 70000 May Accumulated Depreciation-Equipment 37000 May Prepaid Insurance 10000 May Property Tax Payable 36500 May Work in Process Inventory (3800+10700)*200% 29000 May Manufacturing Overhead 29000 (Overhead applied) (Predetermined Overhead Rate*Allocation Base) May Cost of goods sold (85800+133900) 219700 May Finished Goods Inventory 219700

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