The Polaris Company uses a job-order costing system. The following data relate t

Question

The Polaris Company uses a job-order costing system. The following data relate to October, the first month of the company’s fiscal year. a. Raw materials purchased on account, $210,000. b. Raw materials issued to production, $190,000 ($178,000 direct materials and $12,000 indirect materials). c. Direct labor cost incurred, $90,000; indirect labor cost incurred, $110,000. d. Depreciation recorded on factory equipment, $40,000. e. Other manufacturing overhead costs incurred during October, $70,000 (credit Accounts Payable). f. The company applies manufacturing overhead cost to production on the basis of $8 per machine-hour. A total of 30,000 machine-hours were recorded for October. g. Production orders costing $520,000 according to their job cost sheets were completed during October and transferred to Finished Goods. h. Production orders that had cost $480,000 to complete according to their job cost sheets were shipped to customers during the month. These goods were sold on account at 25% above cost. Required: 1. Prepare journal entries to record the information given above. 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant infor-mation above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $42,000.

EXERCISE 3–10 Applying Overhead to a Job [LO3–2] Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $5,000 for direct materials, $8,000 for direct labor, and $6,000 for overhead on its job cost sheet. Job W, which is still in pro-cess at year-end, shows charges of $2,500 for direct materials and $4,000 for direct labor. Required: Should any overhead cost be added to Job W at year-end? If so, how much? Explain.

Explanation / Answer

Solution:

(A). Purchased Raw Material:

   Raw Materials A/c 2,10,000

   Accounts Payable A/c 2,10,000

(B).

   Goods in Inventory Process A/c 1,90,000

Raw Material Inventory A/c 1,90,000

(C).

Goods in Processs Inventory A/c 90,000

   Factory Payroll A/c 90,000

(D).

   Factory Overhead A/c 1,10,000

   Factory Payroll A/c 1,10,000

(E).

Factory verhead A/c 1,10,000

   Depreciation A/c 40,000

   Accounts Payable A/c 70,000

(F).

Goods in Process Inventory A/c 5,20,000

Factory Overheads 5,20,000

(G).

   Finished Goods A/c 5,20,000

   Goods in Process A/c 5,20,000

(H).

Accounts Receivables A/c 4,80,000

Sales A/c 4,80,000

(I).

Cost of Goods Sold A/c

Factory Overhead A/c

(2). Caluculation of Ending Balance of Work-in Process:

   Begining Balance of Raw Material = $ 40,000

Add: Purchase of Raw Material = $ 2,10,000

   Total Amount = $ 2,50,000

   Less: Accounts Payable, Depreciation = $ 1,10,000

   Ending Balance of Raw Mateial = $ 1,40,000

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