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Christophers Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning
Christophers Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of the current year follow:
Raw Materials Inventory | $ 16,600 |
---|---|
Work in Process Inventory | 5,600 |
Finished Goods Inventory | 21,600 |
The following transactions occurred during January:
- Purchased materials on account for $26,600.
- Issued materials to production totaling $20,800, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials.
- Payroll costs totaling $18,100 were recorded as follows:
$11,000 for assembly workers
$2,000 for factory supervision
$2,200 for administrative personnel
$2,900 for sales commissions
- Recorded depreciation: $5,200 for factory machines, $700 for the copier used in the administrative office.
- Recorded $2,000 of expired insurance. Forty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense.
- Paid $6,500 in other factory costs in cash.
- Applied manufacturing overhead at a rate of 200 percent of direct labor cost.
- Completed all jobs but one; the job cost sheet for the uncompleted job shows $2,600 for direct materials, $2,300 for direct labor, and $4,600 for applied overhead.
- Sold jobs costing $50,800. The revenue earned on these jobs was $66,040.
Required:
- Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts:
- Raw Materials Inventory.
- Work in Process Inventory.
- Finished Goods Inventory.
- Cost of Goods Sold.
- Manufacturing Overhead.
- Selling, General, and Administrative Expenses.
- Sales Revenue.
- Determine how much gross profit the company would report during the month of January before any adjustment is made for the overhead balance.
- Determine the amount of over- or underapplied overhead.
- Compute adjusted gross profit assuming that any over- or underapplied overhead balance is adjusted directly to Cost of Goods Sold.
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