JOB ORDER COSTING WITH UNDER- AND OVERAPPLIED FACTORY OVERHEAD M. Evans & Sons manufactures parts for radios. For each job order, it maintains ledger sheets on which it records direct labor, direct materials, and factory overhead applied. The factory overhead control account contains postings of actual overhead costs. At the end of the month, the under- or overapplied factory overhead is charged to the cost of goods sold account.

Factory overhead is applied on the basis of direct labor hours. For Job Nos. 101,

102, 103, and 104, direct labor hours are 12,000, 10,000, 11,000, and 18,000, respectively.

The overhead application rate is $1.20/direct labor hour.

(a) Purchased raw materials on account, $50,000.

(b) Issued direct materials:

Job No. 101: $10,000

Job No. 102: 8,000

Job No. 103: 9,000

Job No. 104: 15,000

(c) Issued indirect materials to production, $8,000.

(d) Incurred direct labor costs:

Job No. 101: $22,000

Job No. 102: 19,000

Job No. 103: 20,500

Job No. 104: 30,000

(e) Charged indirect labor to production, $15,000.

(f) Paid electricity bill, taxes, and repair fees for the factory and charged to production, $8,000.

(g) Depreciation expense on factory equipment, $30,000.

(h) Applied factory overhead to Job Nos. 101–104 using the predetermined factory overhead rate (see above).

(i) Finished Job Nos. 101–103 and transferred to the finished goods inventory account as products N, O, and P.

(j) Sold products N and O for $50,000 and $45,400, respectively.

(k) Transferred under- or overapplied factory overhead balance to the cost of goods sold account.

REQUIRED

1. Prepare general journal entries to record transactions (a) through (k).

2. Post the entries to the work in process and finished goods T accounts only and determine the ending balances in these accounts.

3. Compute the balance in the job cost ledger and make certain this balance agrees with that in the work in process control account.