Christopher’s Custom Cabinet Company uses a job order cost system with overhead

Question

Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2013 follow:

Issued materials to production totaling $20,900, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials.

Recorded $1,400 of expired insurance. Forty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense.

Completed all jobs but one; the job cost sheet for this job shows $2,500 for direct materials, $2,300 for direct labor, and $4,600 for applied overhead.

Sold jobs costing $51,000. The revenue earned on these jobs was $66,300.

Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts:

Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2013 follow:

Explanation / Answer

Christopher Cabinet company T Accounts Raw Material Inventory Details Amt $ Details Amt $ To Opening Balance       16,000.00 By WIP          18,810.00 To Accounts Payable       27,200.00 By Manufacturing Overhead            2,090.00 By Closing Balance          22,300.00       43,200.00          43,200.00 WIP Inventory Details Amt $ Details Amt $ To Opening Balance          6,300.00 By Closing WIP            9,400.00 To Raw Materials       18,810.00 By Finished Jobs transferred          50,210.00 To Direct Labor       11,500.00 To Manufacturing OH Applied       23,000.00       59,610.00          59,610.00 Finished Goods Inventory Details Amt $ Details Amt $ To Opening Balance       20,700.00 By Cost of Goods sold          51,000.00 To Cost of Jobs Finished       50,210.00 By Closing Balance          19,910.00       70,910.00          70,910.00 Cost of Goods sold Details Amt $ Details Amt $ To Finished Goods       51,000.00 Manufacturing Overhead Details Amt $ Details Amt $ To Indirect Materials          2,090.00 By WIP (overhead applied)          23,000.00 To Indirect Labor            1,100.00 To Machine depreciation          5,600.00 To Insurance             560.00 To Cash (Other factory cost)          4,600.00 To Overapplied Overhead          9,050.00       23,000.00          23,000.00 Selling General & Admin Expense Details Amt $ Details Amt $ To Admin Salary          1,800.00 To Sales Commission          2,500.00 To depreciation office equipment             500.00 To Insurance expense-Admin             840.00 Balance          5,640.00 Sales Revenue Details Amt $ Details Amt $ By Accounts receivable          66,300.00 Accounts Payable Details Amt $ Details Amt $ By Raw materials          27,200.00 Cash Details Amt $ Details Amt $ By Manufacturing Overhead -other factory costs            4,600.00 Salaries & Wages Payable Details Amt $ Details Amt $ By WIP          11,500.00 By Manufacturing Overhead            1,100.00 By Admin Salary            1,800.00 By Sales Commission            2,500.00 Balance          16,900.00

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