Chapter 2 Mastery

Mastery Problem: Job Order Costing

Purl of Great Price Company

Maria Young is the sole stockholder of Purl of Great Price Company (POGP Company), which produces high-end knitted sweaters and sweater vests for sale to retail outlets. The company started in January of the current year, and employs three knitters (each of whom work 40 hours per week) and one office manager/knitting supervisor (this employee works 20 hours per week as office manager, and 20 hours per week as knitting supervisor). All wages are paid in cash at the end of each month.

Each knitter has a knitting machine that is used about 2/3 of the knitters time, the rest of the knitters time being involved in hand knitting and piecing together the garments. The company also has a packaging machine used to wrap the garments in plastic for shipping, which is operated by the office manager/knitting supervisor approximately 5 hours per week.

The knitting machines were purchased on January 1 of the current year, and cost $2,400 each, with an anticipated useful life of 10 years and no salvage value. The packaging machine was purchased on the same date and cost $4,800, with the same anticipated useful life and salvage value.

Mastery Problem: Job Order Costing Purl of Great Price Company Maria Young is the sole stockholder of Purt of Great Price Company (POGP Company), which produces high-end knitted sweaters and sweater vests for sale to retail outlets. The company started in January of the current year, and employs three knitters (each of whom work 40 hours per week) and one office manager/knitting supervisor (this employee works 20 hours per week as office manager, and 20 hours per week as knitting supervisor). All wages are paid in cath at the end of each month, Each knitter has a knitting machine that is used about 2/3 of the knitter's time, the rest of the knitter's time being involved in hand knitting and piecing together the garments. The company also has a packaging machine used to wrap the garments in plastic for shipping, which is operated by the office manager/knitting supervisor approximately 5 hours por week The knitting machines were purchased on January 1 of the current year, and cost $2,400 each, with an anticipated useful for 10 years and no salvage value. The packaging machine was purchased on the same date and cost $4,800, with the same anticipated useful life and salvage value Nov. 30 Trial Balance POGP Company Trial Balance November 30, 2048 Account Title Debit Credit 20,000 Accounts Receivable 1,000 Supplies 5,000 5,404 Equipment 12,000 Cash 200 Materials Work in Process Nov. 30 Trial Balance POGP Company Trial Balance November 30, 2048 Account Title Debit Credit Cash 20,000 1,000 Accounts Receivable Supplies 200 Materials 5,000 5,404 12,000 Work in Process Equipment Accumulated Depreciation-Equipment Accounts Payable Common Stock 825 150 10,000 12,000 Retained Earnings Dividends 18,096 Sales 307,500 255,040 Cost of Goods Sold Factory Overhead Wages Expense 15 13,750 330,490 330,490 Predetermined Factory Overhead Rate Since the company is more reliant on labor than machines, Maria decides to use direct labor hours (DU) as the activity base for her predetermined factory overhead rate, rather than machine hours (MH). Estimated Selected Amounts for the Year Estimated depreciation on equipment $1,200 Estimated total Omice Manager/Knitting Supervisor wages $36,000 Estimated office utilities $6,000 Estimated factory utilities $4,800 Estimated factory rent $24,000 Activity Base Data Estimated number of DLH for the year 5,000 Estimated number of MH for the year 3,500 Compute the predetermined factory overhead rate for the current year $9.60 per DEH Materials Requisition Date: Dec. 10 Reg. No. 12255 Job No. 83 Description Qty. Issued Unit Price Amount Yarn type B 600 skeins $5 $3,000 Total issued $3,000 Time Ticket No. 1255 Name: Susan Blake Work Description: Knitting/piecing Dates Job No. Hours Worked Unit Price Amount 12/01-12/15 62 65 $15 $975 12/16-12/31 83 103 15 1,545 Total Cost $2,520 Time Ticket No. 2274 Name: Josh Porter Work Description: Knitting/piecing Dates Job No. Hours Worked Unit Price Amount 12/01-12/15 62 75 $15 $1,125 12/16-12/31 83 88 15 1,320 Total Cost $2,445 Job Cost Sheets On December 10, POGP Company receives an order for 200 sweater vests and assigns Job 3 to the order, Review the Materials Requisition table to add the materials to the Job Cost Sheet for Job 83. On December 15, review the Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 62 for the period December 1 through December 15, on December 31, the last work day of the year for the nitters, review Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 8.3 for the period December 16 through December 31 If there is no amount or an amount is zero, entero. If required, round your answers to the nearest cent Job 62 100 units Sweaters Direct Materials Direct Labor Factory Overhead Total Balance Dec. 1 $5,000 $300 $104 $5,404 Dec. 15 O 3,000 OX 0 X Total Cost 5,000 3,300 Ox 0 x Unit Cost ox Job 83 Balance Dec. 1 Dec. 10 200 units: Sweater vests Direct Materials Direct Labor Factory Overhead Total Job Cost SO $0 $0 $0 3,000 0 0 3.000 o 0 X 0 x O X 3,000 0 15 X Dec 31 Total Cost On December 15, review the Time Ticket tables to journalize the entry to record the addition of factory overhead to Work in Process for the period December 1 through December 15. If an amount box does not require an entry leave it blank Dec. 15 Work in Process Factory Overhead 88 Feedback On December 21, Job 62 is completed. Review the Job Cost Sheets and your journal entries. Journalize the entry to move the associated costs to the finished goods account, 1f an amount box does not require entry, leave it blank Dec 21 Finished Goods Work in Process 88 Feedback On December 22, 75 of the 100 sweaters from Job 62 are sold on account for $125 each Journalize the following transactions The entry to record the sale The entry to record the transfer of costs from Finished Goods to cost of Goods Sold If an amount box does not require an entry leave it blank Dec 22 Accounts Receivable Sales II 10 Dec. 22 Cost of Goods Sold Finished Goods II On December 31, the last work day of the year for the inters, review the Time Ticket tables to journalize the entry to record the adation of direct labor to Work in Process for the period December 16 through December 31. If an amount box does not require an entry, leave it blank Dec 31 Work In Process Wages Payable 0 Feedback On December 31, the last work day of the year for the nitters, review the Time Ticket tables to journalte the entry to record the addition of factory overhead to Work in Process for the period December 16 through December 31, IT an amount box does not require an entry leave it blank Dec 31 Work in Process Factory Overhead Feedback On December 31, journalise the following transaction. Note that expenses (b), (c), and (d) were paid in cash a. One month's depreciation on equipment b. One month's payroll for employees One month's rent of $2,000 d. One month's factory utilities of $1,275 If an amount box does not require an entry leave it blank Dec 31 Factory Overhead Wages Expense Wages Payable . Cash 1100 100. One month's rent of $2,000 d. One month's factory utilities of $1,275 If an amount box does not require an entry, leave it blank Dec 31 Factory Overhead Wages Expense Wapes Payable Cash Accumulated Depreciation Equipment bon) Feedback Check My Work Partially correct not require an entry, leave it blank On December 31, prepare the journal entry to dispose of the balance in the factory overhead account. If an amou Dec 31 Cost of Goods Sold Factory Overhead 3 Final Question What are the balances in the following accounts as of December 31? If an amount is zero, enter "0". Materials Work in Process Finished Goods Factory Overhead Cost of Goods Sold