Problem 15-1A Lott Company uses a job order cost system and applies overhead to
ID: 2508488 • Letter: P
Question
Problem 15-1A 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 $20,000, direct labor $12,000, and manufacturing overhead $16,000. As of January 1, Job No. 49 had been completed at a cost of $90,000 and was part of finished goods inventory. There was a $15,000 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 $122,000 and $158,000, respectively. The following additional events occurred during the month 1. Purchased additional raw materials of $90,000 on account. 2. Incurred factory labor costs of $70,000. Of this amount $16,000 related to employer payroll taxes. 3. Incurred manufacturing overhead costs as follows: indirect materials $17,000; indirect labor $20,000; depreciation expense on equipment $12,000; and various other manufacturing overhead costs on account $16,000 Assigned direct materials and direct labor to jobs as follows. 4. Job No Direct Materials Direct Labor $10,000 39,000 30,000 $5,000 25,000 20,000 50 52Explanation / Answer
Job No.50 Material Labour Overheads Beginning Cost 20000 12000 16000 (133.33% of labour cost) Cost incurred in Jan 10000 5000 6667 Total 30000 17000 22667 Total cost of Completed Goods: Direct material 30000 Direct labour 17000 Overheads 22667 Total cost of Completed Goods: 69667 Job no.51 Material Labour Overheads Cost incurred in Jan 39000 25000 33,333 Total 39000 25000 33,333 Total cost of Completed Goods: Direct material 39000 Direct labour 25000 Overheads 33333 Total cost of Completed Goods: 97333 Job No.52 Material Labour Overheads Cost incurred in Jan 30000 20000 26,667 Req : Journal entries: Raw material inventory Account Dr. 90000 Accounts payable 90000 Factory wages Dr. 70000 Wages payable 54000 Payrol taxes payable 16000 Factory Overheads Account Dr. 65000 Raw material Inventory Account 17000 Factory Wages 20000 Accumulated Depreciation 12000 Accounts payable 16000 Work in Process Accounts Dr. 79000 Raw material Inventory 79000 Work in process Inventory Account Dr. 50000 Factory Wages 50000 Work in Process Inventory Account Dr. 66667 Factory Overheads Account 66667 Finished Goods inventory Account Dr. 167000 Work in process Inventory 167000 Accounts receivable Dr. 280000 sales revenue 280000 Cost of Goods sold Dr. 159667 Inventory Account 159667 Finished Goods inventory balance is $ 97333 (consists of Job no. 51) Under/Over-applied Overheads: Overheads incurred 65000 Less: Applied 66667 Over-applied overheads 1667