Job Order Costing and T-accounts

Arnold Company makes cabinets to customer order. Arnold applies overhead at the rate of 20% of direct labor cost. Jobs are marked up at 30% over cost.

On July 1, Finished Goods inventory consisted of Job 68, costing $9,300. Work in Process inventory consisted of three jobs: Job 70 for $3,200, Job 71 for $1,400, and Job 72 for $700.

During the month of July, Arnold worked on six jobs with the following direct materials and direct labor for the month:

	Job 70	Job 71	Job 72	Job 73	Job 74	Job 75
Direct materials	$500	$1,200	$350	$1,700	$2,500	$150
Direct labor	1,400	2,800	800	3,000	4,900	300

Jobs 70, 71, 73 and 74 were completed during July. Jobs 68, 70, 71 and 74 were sold. (All completed jobs are first transferred to Finished Goods, then to Cost of Goods Sold as they are sold.)

Fill in the following job cost sheet and calculate the total cost by July 31 for each job.

	Job 70	Job 71	Job 72	Job 73	Job 74	Job 75
Beginning balance	$	$	$	$	$	$
Direct materials	$500	$1,200	$350	$1,700	$2,500	$150
Direct labor	1,400	2,800	800	3,000	4,900	300
Applied overhead
Total, July 31	$	$	$	$	$	$

Enter the appropriate numbers to the correct T-accounts for Work-in-Process, Finished Goods and Cost of Goods Sold for each of the following: (Hint: when entering amounts for a transaction that includes more than one job, enter them in order of the job number. That is, if a transaction included amounts for Jobs 70 and 72, the amount for Job 70 would be entered before the amount for Job 72.)

a.	Recognize the beginning balance of Work in Process and of Finished Goods.
b.	Recognize the use of total direct materials for production for July.
c.	Recognize the use of total direct labor for production for July.
d.	Recognize the application of overhead to production for July.
e.	Recognize the completion of each job finished in July.
f.	Transfer each sold job to COGS.
g.	Calculate the ending balances of: WIP, Finished Goods, and COGS.

Work-in-Process (WIP)

Finished Goods

Cost of Goods Sold

(a)		(e)
(b)		(e)
(c)		(e)
(d)		(e)
(g)

(a)		(f)
(e)		(f)
(e)		(f)
(e)		(f)
(e)
(g)

(f)
(f)
(f)
(f)
(g)

Sales revenue for Arnold in July is $

Use the Interactive Graph to answer the following questions:

If direct labor added to Job 73 equaled $2,400, the ending balances of each of the following accounts would be affected in what way?

Work in Process	Increase
Finished Goods	Decrease
Cost of Goods Sold
Sales Revenue

If the overhead rate based on direct labor was 40%, the ending balances of each of the following accounts would be affected in what way?

Work in Process
Finished Goods
Cost of Goods Sold
Sales Revenue