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ID: 2531902 • Letter: R
Question
Required information
[The following information applies to the questions displayed below.]
Marcelino Co.'s March 31 inventory of raw materials is $88,000. Raw materials purchases in April are $570,000, and factory payroll cost in April is $391,000. Overhead costs incurred in April are: indirect materials, $52,000; indirect labor, $29,000; factory rent, $38,000; factory utilities, $19,000; and factory equipment depreciation, $53,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $635,000 cash in April. Costs of the three jobs worked on in April follow.
Materials purchases (on credit).
Direct materials used in production.
Direct labor paid and assigned to Work in Process Inventory.
Indirect labor paid and assigned to Factory Overhead.
Overhead costs applied to Work in Process Inventory.
Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
Transfer of Jobs 306 and 307 to Finished Goods Inventory.
Cost of goods sold for Job 306.
Revenue from the sale of Job 306.
Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)
2. Prepare journal entries for the month of April to record the above transactions.
Explanation / Answer
Solution:
Primary working for journal entries
Job 306
Job 307
Job 308
Total
Balances on March 31
Direct materials
31,000
36,000
67,000
Direct labor
23,000
15,000
38,000
Applied overhead
11,500
7,500
19,000
Costs during April
Direct materials
130,000
210,000
105,000
445,000
Direct labor
103,000
155,000
104,000
362,000
Applied overhead (50% of direct labor cost)
51500
77500
52000
181,000
Total Cost
350000
501000
261000
1,112,000
Status on April 30
Finished (sold)
Finished (unsold)
In process
Journal Entries
No.
Transaction
General Journal
Debit
Credit
1
a.
Raw materials inventory
570000
Accounts payable
570000
2
b.
Work in process inventory
445000
Raw materials inventory
445000
3
c.
Work in process inventory
362000
Cash
362000
4
d.
Factory overhead
29000
Cash
29000
5
e.
Work in process inventory (Refer working)
181000
Factory overhead
181000
6
f(1).
Factory overhead
52000
Raw materials inventory
52000
7
f(2).
Factory overhead
38000
Cash
38000
8
f(3).
Factory overhead
53000
Accumulated depreciation-factory equipment
53000
9
f(4).
Factory overhead (utilities)
19000
Cash
19000
10
g.
Finished goods inventory (350,000 Job 306 + 501,000 Job 307)
851000
Work in process inventory
851000
11
h.
Cost of goods sold (350,000 Job 306)
350000
Finished goods inventory
350000
12
i.
Cash
635000
Sales
635000
13
j.
Cost of goods sold (Refer Note 1)
10000
Factory overhead
10000
Note 1 --- Calculation of under or over applied overhead
Applied Factory Overhead = $181,000
Actual Overhead Incurred during the April = Indirect materials 52,000 + indirect labor 29,000 + factory rent 38,000 + factory utilities 19,000 + depreciation 53,000
= $191,000
Here, applied overheads are less than actual incurred overhead, it means overheads are under applied by $10,000 (191,000 – 181,000).
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Job 306
Job 307
Job 308
Total
Balances on March 31
Direct materials
31,000
36,000
67,000
Direct labor
23,000
15,000
38,000
Applied overhead
11,500
7,500
19,000
Costs during April
Direct materials
130,000
210,000
105,000
445,000
Direct labor
103,000
155,000
104,000
362,000
Applied overhead (50% of direct labor cost)
51500
77500
52000
181,000
Total Cost
350000
501000
261000
1,112,000
Status on April 30
Finished (sold)
Finished (unsold)
In process
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