Mariya Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of direct materials used in production. Its predetermined overhead rate was based on a cost formula that estimated $221,200 of manufacturing overhead for an estimated allocation base of $158,000 direct material dollars. The following transactions took place during the year (all purchases and services were acquired on account):
a. Raw materials purchased, $145,000.
b. Raw materials requisitioned for use in production (all direct materials), $141,000.
c. Utility bills incurred in the factory, $24,000.
d. Costs for salaries and wages were incurred as follows:
|Selling and administrative salaries||$143,000|
e. Maintenance costs incurred in the factory, $17,000.
f. Advertising costs incurred, $128,000.
g. Depreciation recorded for the year, $43,000 (70% relates to factory assets, and the remainder relates to selling and administrative assets).
h. Rental cost incurred on buildings, $85,000 (80% of the space is occupied by the factory, and 20% is occupied by sales and administration).
i. Miscellaneous selling and administrative costs incurred, $11,000.
j. Manufacturing overhead cost was applied to jobs, $ ?
k. Cost of goods manufactured for the year, $555,000.
l. Sales for the year (all on account) totaled $1,100,000. These goods cost $530,000 according to their job cost sheets.
The balances in the inventory accounts at the beginning of the year were as follows:
|Work in process||$24,000|
a. Using the above data, prepare the following eight journal entries:
1. To record the purchase of raw materials
2. To transfer cost of raw materials to production, record direct labor costs, and apply overhead to work in process inventory
3. To transfer cost of completed units to finished goods inventoryj
4. To record sales
5. To transfer cost of finished goods to cost of goods sold
6. To record factory overhead costs
7. To transfer over- or underapplied overhead to cost of goods sold
8. To record selling and administrative expenses
As these are summary journal entries for an entire accounting period, no dates are given. Use the number of the journal entry in place of a date on the general journal page. All of the information needed to correctly record the entries is provided. However, you may find it useful to prepare t-accounts on scratch paper to help you determine the correct debits and credits for some entries.
b. Job 521 was one of the many jobs started and completed during the year. The job required $3,900 in direct materials and 400 hours of direct labor time at a rate of $14 per hour. If the job contained 540 units and the company billed at 65% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer?
Broucek Inc. makes baby furniture from fine hardwoods. The company uses a job-order costing
system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The
predetermined overhead rate in the Preparation Department is based on machine hours, and
the rate in the Fabrication Department is based on direct labor-hours. At the beginning of the
year, the company’s management prepared the following information for the year. All figures
are estimates, except the fixed overhead and variable overhead rates, which are actual figures
from last year and remain the same this year. In other words, it is machine-hours and direct
labor-hours that are estimated and used with fixed overhead and variable overhead per
machine-hour and per direct labor-hour in order to calculate rates for applying overhead.
|Direct materials cost||$194,000||$204,000|
|Direct labor cost||$280,000||$521,000|
|Fixed manufacturing overhead cost||$207,500||$518,700|
|Variable manufacturing overhead per machine-hour||$3.00||–|
|Variable manufacturing overhead per direct labor-hour||–||$5.00|
Job 135 was started on April 1 and completed on May 12. The company’s cost records show the following information concerning the job:
|Direct materials cost||$940||$1,120|
|Direct labor cost||$690||$970|
a. Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department.
b. Compute the total overhead cost applied to Job 135.
c. What would be the total cost recorded for Job 135? If the job contained 29 units, what would be the unit product cost?
d. At the end of the year, the records of Broucek Inc. revealed the following actual cost and operating data for all jobs worked on during the year:
|Direct materials cost||$165,800||$412,000|
|Direct labor cost||$464,550||$711,400|
What was the amount of underapplied or overapplied overhead in each department at the end of the year?
|VitalVitamin is produced in a three-step process consisting of mixing, shaping, and packaging. Direct materials like tars, acids, and inert ingredients are all introduced at the beginning of the mixing cycle, at a per unit cost of $0.30. Direct labor and factory overhead are incurred uniformly throughout each stage of production, and in equal proportion (i.e., $1 of overhead for each $1 of labor). Costs are very stable, and there have been no changes in per unit costs for any element of production over the past several months. Information for the Mixing Department for the month of April, 2011, follows.
Beginning of April: 100,000 units in process (40% complete at a total cost of $50,000)
During April: 800,000 units put into production; additional costs into production
End of April: 70,000 units in process (50% complete).
a. Prepare a cost of production report for the Mixing Department for April. Use the weighted-average costing method.
b. Prepare April’s journal entries that affect the Mixing Department’s Work in Process account (two entries).