S: SET A oder P16-1A Lott Company uses a job order cost system and applies overh
ID: 2412166 • Letter: S
Question
S: SET A oder P16-1A Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Job 50 was the only job in process The costs incurred prior to January I on this job were as follows: direct materials $20,000 direct labor $12,000, and manufacturing overhead $16,000. As of January 1, Job 49 had been completed at a cost of $90,000 and was part of finished goods inventory. There was a $15,000 balance in the Raw Materials Inventory account. During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the morith for 122,000 and $158,000, respectively: The following additional events occurred during the month. 1. Purchased additional raw materials of $90,000 on account. 2. Incurred factory labor costs of $70,000. Of this amount $16,000 related to employer 3. Incurred manufacturing overhead costs as follows: indirect materials $17,000, indirect $20.000, depreciation expense on equipment $12.000, and various other manu- payroll taxes labor facturing overhead costs on account $16,000. 4. Assigned direct materials and direct labor to jobs as follows. Direet Labor $ 5,000 25,000 20,000 Job No. 50 Direct Materials $10,000 39,000 30,000 52 Instructions (a) Calculate the predetermined overhead rate for 2017, assuming Lott Company esti- (b) Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job (c) Prepare the journal entries to record the purchase of raw materials, the factory labor manufacturing overhead costs of $840,000, direct labor costs of $700,000., and direct labor hours of 20,000 for the year cost sheet for Job 50. costs incurred, and the manufacturing overhead costs incurred during the month January (d) Prepare the journal entries to record the assignment of direct materials, direct labor and manufacturing overhead costs to production. In assigning manufacturing over- head costs, use the overhead rate calculated in (a). Post all costs to the job cost sheets as necessary (e) Total the job cost sheets for any job(s) completed during the month. Prepare the jour nal entry (or entries) to record the completion of any job(s) during the month. () Prepare the journal entry (or entries) to record the sale of any job(s) during the month. (g) What is the balance in the Finished Goods Inventory account at the end of the month? What does this balance consist of? (h) What is the amount of over- or underapplied overhead?Explanation / Answer
Solution:
We need to calculate the amount of jobs completed, ending balances of job. Here is the primary working for the same:
Job 49
Job 50
Job 51
Job 52
Beginning work in process (20000 + 12000 + 16000)
$48,000
Costs incurred during the month
Direct materials
$10,000
$39,000
$30,000
Direct labor
$5,000
$25,000
$20,000
Manufacturing Overhead (Direct labor cost * $1.20 Predetermined Overhead Rate)
$6,000
$30,000
$24,000
Total Manufacturing Cost
$0
$69,000
$94,000
$74,000
Beginning Balance of Finished Goods Inventory
$90,000
Cost of Jobs Completed during the period
$69,000
$94,000
Note 1 --- Predetermined Overhead Rate
Predetermined Overhead Rate (based on direct labor cost) = Total Estimated Manufacturing Overhead / Total Estimated Direct labor costs
= $840,000 / $700,000 x 100
= $1.20 per direct labor dollar
Part E ---
Total Costs Jobs Completed during the month = $69,000 Cost of Job 50 + $94,000 Cost of Job 51 = $163,000
Journal Entry for completion of job
General Journal
Debit
Credit
Finished Goods Inventory
$163,000
Work In Process Inventory
$163,000
(Job 50 & 51 completed and transferred to finished goods)
Part F --- Recording of Sale of Job
General Journal
Debit
Credit
Accounts Receivable
$280,000
Sales Revenue ($122,000 + $158,000)
$280,000
(Job 49 & 50 sold and recorded)
Part G – Ending balance in finished goods inventory
From primary working, ending balance in finished goods inventory is the cost of Job 51, since job 49 & 50 already been sold during the period.
Hence, Ending Balance of Finished Goods Inventory = $94,000
What does this balance consists of ---- This balance is related to Job 51 and it consists direct material, direct labor and manufacturing overheads related to Job 51.
Part H --- Over or Under Applied overhead
Total Applied Manufacturing Overhead (Refer Primary Working) = Job 50 $6,000 + Job 51 $30,000 + Job 52 $24,000 = $60,000
Total Manufacturing Overheads actually incurred
$$
Indirect materials
$17,000
Indirect labor
$20,000
Depreciation on Equipment
$12,000
Other manufacturing overhead costs
$16,000
Total Manufacturing Overheads
$65,000
Here, applied manufacturing overheads are lesser than actual manufacturing overheads incurred, it means applied manufacturing overheads are UNDER APPLIED by $5,000 ($65,000 – 60,000).
Hence, UNDER APPLIED Manufacturing Overheads = $5,000
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Job 49
Job 50
Job 51
Job 52
Beginning work in process (20000 + 12000 + 16000)
$48,000
Costs incurred during the month
Direct materials
$10,000
$39,000
$30,000
Direct labor
$5,000
$25,000
$20,000
Manufacturing Overhead (Direct labor cost * $1.20 Predetermined Overhead Rate)
$6,000
$30,000
$24,000
Total Manufacturing Cost
$0
$69,000
$94,000
$74,000
Beginning Balance of Finished Goods Inventory
$90,000
Cost of Jobs Completed during the period
$69,000
$94,000
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