Instructions Prepare general journal entries to summarize each of these transact
ID: 2489586 • Letter: I
Question
Instructions Prepare general journal entries to summarize each of these transactions in the company's general ledger accounts. Lincoln Estates manufactures log homes to customers' specifications and uses job order costing. A predetermined overhead rate is used in applying manufacturing overhead to individual jobs. In the Cutting Department, overhead is applied on the basis of machine-hours. In the Assembly Department, overhead is applied on the basis of direct labor hours. At the beginning of the current year, management made the following estimates to assist in determining the overhead application rates: Production of a home ordered by Cliff Newton (job no. 80) was started early in the year and completed at the end of the first quarter, on March 31. The records for this job show the following cost information: Selected additional information for the first quarter is as follows: Instructions Compute the predetermined overhead rate for each department. What is the total cost of the home produced for Cliff Newton? Prepare the entries required to record the sale (on account) of the home to Cliff Newton. The sales price of the order was $602,000. Determine the over- or underapplied overhead for each department at the end of the first quarter.Explanation / Answer
a) Predertermined rate of overhead absorption:
Cutting = $600000 / 30000 = $20/MH
Assembly = $480000 / 32000 = $15/DLH
b) Total cost of Cliff Newton Job :
Cutting Department = Direct Material $100000 + Direct Labor $10000 + Overhead (400 * $20=$8000) = $118000
Assembly Dep. = Direct Material $150000 + Direct Labor $108000 + Overhead (3600 * $15=$54000) = $312000
Total cost of Cliff Newton Job = $118000 + 312000 = $430000
c) Journal Entries:
Debit Accounts Receivable - Cliff Newton $602000
Credit Sales Revenue $602000
Debit Cost of Goods Sold $430000
Credit Finished Goods $430000
d) Under / Over Overhead applied :
Cutting = Predetermined overhead (7000 * 20= $140000) - Actual overhead $142000 = $2000 Under-applied
Assembly = Predetermined overhead (6000 * 15= $90000) - Actual overhead $87000 = $3000 Over-applied