Problem 20-1A Lott Company uses a job order cost system and applies overhead to
ID: 2611428 • Letter: P
Question
Problem 20-1A Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $23,600, direct labor $14,160, and manufacturing overhead $18,880. As of January 1, Job No. 49 had been completed at a cost of $106,200 and was part of finished goods inventory. There was a $17,700 balance in the Raw Materials Inventory account. During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $143,960 and $186,440, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $106,200 on account 2. Incurred factory labor costs of $82,600. Of this amount $18,880 related to employer payroll taxes 3. Incurred manufacturing overhead costs as follows: indirect materials $20,060; indirect labor $23,600; depreciation expense on equipment $14,160; and various other manufacturing overhead costs on account $18,880o Assigned direct materials and direct labor to jobs as follows. Job No. Direct Materials Direct Labor 50 51 52 $11,800 46,020 35,400 $5,900 29,500 23,600 Calculate the predetermined overhead rate for 2017, assuming Lott Company estimates total manufacturing overhead costs of $991,200, direct labor costs of $826,000, and direct labor hours of 23,600 for the year. (Round answer to the nearest whole percent, ee25%) Predetermined overhead rate
Explanation / Answer
(a) $991,200 ÷ $826,000 direct labor costs = 120% of direct labor costs
(b) See solution to part (e) for job cost sheets
(c) Raw Materials Inventory..................................................................... 106,200
Accounts Payable........................................................................ 106,200
Factory Labor....................................................................................... 82,600
Factory Wages Payable.............................................................. 63,720
Employer Payroll Taxes Payable.............................................. 18,880
Manufacturing Overhead.................................................................... 76,700
Accounts Payable........................................................................ 18,880
Accumulated Depreciation......................................................... 14,160
Raw Materials Inventory........................................................... 20,060
Factory Labor............................................................................. 23,600
(d) Work in Process Inventory.................................................................. 93,220
Raw Materials Inventory
($11,800 + $46,020 + $35,400)................................................ 93,220
Work in Process Inventory.................................................................. 59,000
Factory Labor ($5,900 + $29,500 + $23,600)........................... 59,000
Work in Process Inventory.................................................................. 70,800
Manufacturing Overhead
($59,000 X 120% of direct labor costs)................................. 70,800
See solution to part (e) for postings to job cost sheets.
(e) Job Cost Sheets
Job No. 50
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Beg.
Jan.
$23,600
11,800
$35,400
$14,160
5,900
$20,060
*$18,880*
* 7,080*
*$25,960*
Cost of completed job
Direct materials.......................................................................................... $35,400
Direct labor................................................................................................. 20,060
Manufacturing overhead.......................................................................... 25,960
Total cost............................................................................................................... $81,420
*$5,900 X 120%
Job No. 51
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Jan.
$46,020
$46,020
$29,500
$29,500
**$35,400**
**$35,400**
Cost of completed job
Direct materials.......................................................................................... $ 46,020
Direct labor................................................................................................. 29,500
Manufacturing overhead.......................................................................... 35,400
Total cost............................................................................................................... $110,920
**$29,500 X 120%
Job No. 52
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Jan.
$35,400
$23,600
***$28,320***
***$23,600 X 120%
Finished Goods Inventory.................................................................................... 192,340
Work in Process Inventory........................................................................... 192,340
($81,420 + $110,920)
(f) Accounts Receivable................................................................................... 330,400
Sales ($143,960 + $186,440)........................................................................... 330,400
Cost of Goods Sold..................................................................................... 187,620
Finished Goods Inventory
($106,200 + $81,420).................................................................................. 187,620
(g)
Finished
Goods Inventory
Beginning balance
Cost of completed jobs 50 and 51
106,200
192,340
187,620
Cost of jobs 49 and 50 sold
Ending balance
110,920
The balance in this account consists of the cost of completed Job No. 51 which has not yet been sold.
(h)
Manufacturing Overhead
Actual
76,700
Applied
70,800
5,900
The balance in the Manufacturing Overhead account is under applied.
Job No. 50
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Beg.
Jan.
$23,600
11,800
$35,400
$14,160
5,900
$20,060
*$18,880*
* 7,080*
*$25,960*
Cost of completed job
Direct materials.......................................................................................... $35,400
Direct labor................................................................................................. 20,060
Manufacturing overhead.......................................................................... 25,960
Total cost............................................................................................................... $81,420
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