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 2016 follow Raw Materials Inventory Work in Process Inventory Finished Goods Inventory $15,700 7,000 The following transactions occurred during January (a) Purchased materials on account for $27,900 (b) Issued materials to production totaling $21,000,90 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials (c) Payroll costs totaling $18,200 were recorded as follows: $11,900 for assembly workers 1,700 for factory supervision 1,300 for administrative personnel 3,300 for sales commissions Recorded depreciation $5,000 for machines, $1,000 for the copier used in the administrative office. (o) Recorded $1,100 of expired insurance. Forty percent was insurance on the manufacturing facility, with the nemainder dlassñed as an administrative expense. Pad S5,800 in cher factory costs in cash. al Applied manufacturing overhead at a rate of 200 percent of direct labor cost h) Completed all jobs but one, the job cost sheet for this job shows $2.400 for direct materials, $2.100 for direct labor, and $4,200 for applied overhead (0) Sold jobs costing $51,300. The revenue eamed on these jobs was $66,690 Required 1. Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts: (Post all amounts separately Do not combine/add any dolar amounts when posting to the t-accounts a. Raw Materials Iwentory b. Work in Process Inventory c. Finished Goods Inventory d. Cost ol Goods Sold e. Seling. General, and Administrative Expenses Sales Revenue g. Other accounts (Cash, Paryables, etc.) 3 5 8

Explanation / Answer

1.

2. Unadjusted Gross Profit: $15390

Sales revenue $66690 - Unadjusted Cost of goods sold $51300 = $15390

3. Manufacturing Overhead Overapplied $8760

Overhead incurred $15040 - Overhead applied $23800 = Overhead overapplied $8760

4. Adjusted Gross Profit: $24150

Sales revenue $66690 - Adjusted Cost of goods sold ($51300 - $8760) = $66690 - $42540 = $24150

Raw Materials Inventory Work in Process Inventory Beg. Bal. 15700 Beg. Bal. 7000 (a) 27900 18900 (b) (b) 18900 52900 (h) 2100 (b) (c) 11900 End. Bal. 22600 (g) 23800 End. Bal. 8700 Finished Goods Inventory Cost of Goods Sold Beg. Bal. 20200 Beg. Bal. (h) 52900 51300 (i) (i) 51300 End. Bal. 21800 End. Bal. 51300 Manufacturing Overhead Selling, General, and Administative Expenses Beg. Bal. Beg. Bal. (b) 2100 23800 (g) (c) 1300 (c) 1700 (c) 3300 (d) 5000 (d) 1000 (e) 440 (e) 660 (f) 5800 End. Bal. 6260 End. Bal. 8760 Sales Revenue Other Accounts Beg. Bal. (Cash, Payables, etc.) 66690 (i) Beg. Bal. (i) 66690 27900 (a) End. Bal. 66690 18200 (c) 6000 (d) 1100 (e) 5800 (f) End. Bal. 7690

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