Job Costing Journal Entries (11 marks)

ABC Company uses a job-order costing system.The following data relate to January, the first month of the company's fiscal year:

1.Direct materials purchased on account, $960.

2.Direct materials issued to production, $972 ($852 direct materials and $120 indirect materials).

3.Direct labor cost incurred, $1560; indirect labor cost incurred, $1080.

4.Depreciation on building and manufacturing equipment, $480.

5.Other manufacturing overhead costs incurred during January, $660 (credit accounts payable).

6.The company applies manufacturing overhead cost to production on the basis of 160% of direct manufacturing labor cost.

7.Production orders costing $4944 according to their job cost sheets were completed during January and transferred to finished goods.

8. Production orders that had cost $4824 to complete according to their job cost sheets were shipped to customers during the month.These goods were sold on account for $9600.

REQUIRED:

1.Prepare journal entries to record the preceding information.Number your entries.

2.Prepare the journal entry to dispose of the over- or underallocated manufacturing overhead to Cost of Goods Sold.

Job Costing, Overhead Rates (12 marks)

The Solomon Company uses a job-costing system at its Dover Plant.The plant has a

Machining Department and a Finishing Department.Overhead costs in the Machining Department are allocated using actual machine-hours, and the Finishing Department allocates overhead costs using actual labor costs.The 2011 budget for the plant is as follows:

Machining

Finishing

Department

Department

Manufacturing Overhead

$12,000,000

$9,600,000

Direct Manufacturing Labor Cost

$1,080,000

$4,800,000

Direct Manufacturing Labor Hours

30,000

160,000

Machine-hours

200,000

33,000

REQUIRED:

1.What is the budgeted overhead rate that should be used in the Machining Department?In the Finishing Department?

2.During the month of January, the cost record for Job 431 shows the following:

Machining

Finishing

Department

Department

Direct Materials Used

$16,800

$3,600

Direct Manufacturing Labor Cost

$720

$1,500

Direct Manufacturing Labor Hours

30

50

Machine-hours

130

10

a)What is the total manufacturing overhead allocated to Job 431?

b)What would be the retail price of Job 431 if the company expected a profit margin of 60%?

3. Balances at the end of 2011 are as follows:

Machining Finishing Department Department Manufacturing overhead incurred $13,440,000 $9,480,000 Direct Manufacturing Labor Cost $ 1,140,000 $4,920,000 Machine-hours 220,000 32,000

a) Compute the under or over allocated manufacturing overhead for each department.