Marcelino Co.’s March 31 inventory of raw materials is $80,000. Raw materials purchases in April are $500,000, and factory payroll cost in April is $363,000. Overhead costs incurred in April are: indirect materials, $50,000; indirect labor, $23,000; factory rent, $32,000; factory utilities, $19,000; and factory equipment depreciation, $51,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $635,000 cash in April. Costs of the three jobs worked on in April follow.

Required

1. Determine the total of each production cost incurred for April (direct labor, direct materials, and applied overhead) and the total cost assigned to each job (including the balances from March 31).

2. Prepare journal entries for the month of April to record the following.

a. Materials purchases (on credit).

b. Direct materials used in production.

c. Direct labor paid and assigned to Work in Process Inventory.

d. Indirect labor paid and assigned to Factory Overhead.

e. Overhead costs applied to Work in Process Inventory.

f. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)

g. Transfer of Jobs 306 and 307 to Finished Goods Inventory.

h. Cost of goods sold for Job 306.

i. Revenue from the sale of Job 306.

j. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

3. Prepare a schedule of cost of goods manufactured.

4. Compute gross profit for April. Show how to present the inventories on the April 30 balance sheet.

Analysis Component

5. The over- or under-applied overhead is closed to Cost of Goods Sold. Discuss how this adjustment impacts business decision making regarding individual jobs or batches of jobs. 

Job 306 Job 307 Job 308 Balances on March 31 Direct materials $ 29,000 $ 35,000 Direct labor.... 20,000 18,000 Applied overhead. Costs during April 10,000 9,000 Direct materials 135,000 220,000 $100,000 Direct labor..... 85,000 150,000 105,000 Applied overhead. ? ? ? Status on April 30... Finished (sold) Finished (unsold) In process