Dillon Products manufactures various machined parts to customer specifications.

Question

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,166,200 in manufacturing overhead cost at an activity level of 563,000 machine-hours.

The company spent the entire month of January working on a large order for 12,800 custom-made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:

Raw materials purchased on account, $324,000.

Raw materials used in production, $270,000 (80% direct materials and 20% indirect materials).

Labor cost accrued in the factory, $177,000 (one-third direct labor and two-thirds indirect labor).

Depreciation recorded on factory equipment, $62,200.

Other manufacturing overhead costs incurred on account, $85,300.

Manufacturing overhead cost was applied to production on the basis of 40,690 machine-hours actually worked during the month.

The completed job for 12,800 custom-made machined parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)

- Prepare a journal entry for item (g) above.

Finished goods Debit $576106, Work in Process Credit $5767106

- Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts.

Manufacturing Overhead Ending Balance: $18394

Work in Process Ending Balance: $576106

Required:

4. If 10,400 of the custom-made machined parts are shipped to the customer in February, how much of this job’s cost will be included in cost of goods sold for February?(Portion of Job Included in Cost of Goods Sold)

Explanation / Answer

Journal Entry Manufacturing Overhead S. No. Accounts Title and explanation Debit $ Credit $ Raw Material $54,000 Work in process $301,106 a Raw Materials $324,000 Wages Payable $118,000 (@ $7.40 per labor hr.) Accounts Payable $324,000 Factory equipments- Depreciation $62,200 - To Record Purchase of Raw Material Other Overhead $85,300 Closing Balance $18,394 b Work in process $216,000 Total $319,500 Total $319,500 Manufacturing Overhead $54,000 Raw Materials $270,000 Work in process To Record Raw Material Used Raw Materials $216,000 Finished Goods Inventory $576,106 Wages Payable $59,000 c. Work in process $59,000 Manufacturing Overhead $301,106 Manufacturing Overhead $118,000 Total $576,106 Total $576,106 Wages Payable $177,000 To Record Labour cost incurred 4. Computation of Job Cost included in Cost pf Goods Sold Total Calculated cost for 12,800 Unit $576,106 d Manufacturing Overhead $62,200 Cost of 10400 Unit $468,086.13 Depreciation - Factory equipment $62,200 ($576106/12800*10400) To Record Depreciation e Manufacturing Overhead $85,300 Accounts Payable $85,300 To Record overhead cost incurred f Work in process ($7.4*40690Hour) $301,106 Manufacturing Overhead $301,106 To record Overhead cost Applied g Finished Goods $576,106 Work in progress $576,106

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