Basic Job Costing Project Reed Incorporated uses a job-order costing system and
ID: 2413695 • Letter: B
Question
Basic Job Costing Project
Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours.
At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000.
The following information pertains to December of the current year:
Job 10
Job 11
Job 12
Total
Work-in-process, Dec. 1
$16,000
$26,000
$38,000
$80,000
The following transactions took place during the month of December:
1. Purchased raw materials for $25,000 on credit;
2. Requisitioned and used direct materials for the three jobs:
a. $4,000 for Job 10
b. $4,800 for Job 11
c. $7,200 for Job 12
3. Used indirect materials worth $20,000
4. . Incurred direct labor costs as follows:
a. $ 2,400 for Job 10
b. $3,600 for Job 11
c. $4,000 for Job 12
5. Incurred $30,000 worth of indirect manufacturing labor costs.
6. Depreciation on manufacturing plant and equipment $21,000.
7. During the month of December, the company used the following direct labor hours and machine hours for the three jobs:
Job 10
Job 11
Job 12
Total
Machine hours
400
700
900
2,000
Labor hours
120
180
200
500
Required:
1. Compute the predetermined overhead application rate.
2. Prepare the journal entries for the transactions that took place in December and apply manufacturing overhead to the jobs using the actual machine hours.
3. Determine the total cost associated with each job.
4. If jobs 10 and 12 were completed, prepared the journal entry to move jobs 10 and 12 to finished goods.
5. Delivered job 10 to customers that paid $40,000 cash; prepare the journal entries to sell job 10 and to recognize the associated cost of goods sold.
6. What is the cost assigned to ending work in process (control account)?
7. What is the cost assigned to ending finished goods (control account)?
8. How much was manufacturing overhead over/underapplied?
Job 10
Job 11
Job 12
Total
Work-in-process, Dec. 1
$16,000
$26,000
$38,000
$80,000
Explanation / Answer
Req 1: Estimated overheeads 240000 Divide: Estimated machine hour 8000 OH rate per MH 30 Req 2: Journal entries Accounts title and explanations Debit $ Credit $ 1 Raw material Inventory Account Ddr. 25000 Accounts payable 25000 2 Work in process Inventory Account Dr. 16000 Raw material Invventory 16000 3 Manufacturing OH Account Dr. 20000 Raw material Inventory 20000 4 Work in process Inventory Dr. 10000 Wages payable 10000 5 Manufacturing OH Account Dr. 30000 Wwages payable 30000 6 Manufacturing OH Account Dr. 21000 Accumulated dep 21000 7 Work in process Inventory Account 60000 Manufacturing OH account (2000 Mh @ 30) 60000 Req 3: Total cost Job 10 Job 11 Job 12 Begininng Balance 16000 26000 38000 Add: Current cost Material 4000 4800 7200 Labour 2400 3600 4000 Oh applied 12000 21000 27000 Total cost 34400 55400 76200 Req 4: Finished Goods inventory Account Dr. (34400+55400) 89800 Work in process inventory Account 89800 Req 5: Cash Account Dr. 40000 sales revenue 40000 Cost of Goods sold Account Dr. 34400 Finished Goods inventory 34400 Req 6: Ending WORK in process (Job 12): $ 76200 Rreq 7: Cost of Finished Goods inventory (Job 11): $ 55400 Req 8: Actual OH incurred (20000+30000+21000) 71000 Less: Actual OH applied (2000 Mh @ 30) 60000 Under-applied OH 11000