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?