Question
Danson, Inc. who uses job-costing system, had 2 jobs in process at the start of 20x1. Job no. 59 ($95,000) and job no. 60 ($39,500).
Danson, Inc. who uses job-costing system, had 2 jobs in process at the start of 20x1. Job no. 59 ($95,000) and job no. 60 ($39,500). The company applies manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year were expected to be $720,000 and 20,000 hours, respectively. Danson, Inc. worked on three jobs during the first quarter. Direct materials used, direct labor incurred, and machine hours consumed were:
JOB NUMBER | DIRECT MAERIALS | DIRECT LABOR | MACHINE HOURS |
59 | $18,000 | $45,000 | 900 |
60 | --- | 25,000 | 600 |
61 | 37,000 | 35,000 | 1,200 |
Manufacturing overhead during the first quarter included charges for depreciation ($20,000), indirect labor ($50,000), indirect materials used ($4,000), and other factory costs ($108,700). Garrett, Inc. completed job no. 59 and job no. 60 and job no. 59 was sold for cash, making a gross profit of $24,600 for the company.
1. Calculate the company's predetermined overhead application rate.
2. Create journal entries as of March 31st to record the following:
a. the issuance of direct material to production and the direct labor incurred
b. the manufacturing overhead that occurred during the quarter
c. the application of manufacturing overhead to production
d. the completion of jobs 59 and 60
e. the sale of job 59
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