Mastery Problem: Job Order Costing Purl of Great Price Company Maria Young is the sole stockholder of Purl of Great Price Company (POGP Company), which produces high-end knitted sweaters and sweater vests for sale to retail outlets. The company started in January of the current year, and employs three knitters (each of whom work 40 hours per week) and one office manager/knitting supervisor (this employee works 20 hours per week as office manager, and 20 hours per week as knitting supervisor). All wages are paid in cash at the end of each month. Each knitter has a knitting machine that is used about 2/3 of the knitter's time, the rest of the knitter's time being involved in hand knitting and piecing together the garments. The company also has a packaging machine used to wrap the garments in plastic for shipping, which is operated by the office manager/knitting supervisor approximately 5 hours per week. The knitting machines were purchased on January 1 of the current year, and cost $2,400 each, with an anticipated useful life of 10 years and no salvage value. The packaging machine was purchased on the same date and cost $4,800, with the same anticipated useful life and salvage value. Nov. 30 Trial Balance POGP Company Trial Balance November 30, 2048 Account Title Debit Credit Cash 20,000 Accounts Receivable 1,000 200 Supplies Materials Work in Process 5,000 5,404 12,000 825 150 Equipment Accumulated Depreciation-Equipment Accounts Payable Common Stock Retained Earnings Dividends 10,000 12,000 18,096 Sales 307,500 255,040 Cost of Goods Sold Factory Overhead 15 Wages Expense 13,750 330,490 330,490 Predetermined Factory Overhead Rate Since the company is more reliant on labor than machines, Maria decides to use direct labor hours (DLH) as the activity base for her predetermined factory overhead rate, rather than machine hours (MH). Estimated Selected Amounts for the Year Estimated depreciation on equipment $1,200 Estimated total Office Manager/Knitting Supervisor wages $30,000 Estimated office utilities $3,000 Estimated factory utilities $4,800 Estimated factory rent $12,000 Activity Base Data Estimated number of DLH for the year 6,250 Estimated number of MH for the year 4,375 Compute the predetermined factory overhead rate for the current year. Feedback Check My Work Review the definitions of items that are included in factory overhead for the computation of estimated total factory overhead costs. Date: Dec. 10 Materials Requisition Reg. No. 12255 Job No. 83 Description Qty. Issued Unit Price Yarn type B 700 skeins $5 Total issued Amount $3,500 $3,500 Time Ticket No. 1255 Name: Susan Blake Work Description: Knitting/piecing Dates Job No. Hours Worked Unit Price Amount 12/01-12/15 62 65 $15 $975 12/16-12/31 83 15 1,545 103 Total Cost $2,520 Time Ticket No. 2274 Name: Josh Porter Work Description: Knitting/piecing Dates Job No. Hours Worked Unit Price Amount 12/01-12/15 62 75 $15 $1,125 12/16-12/31 83 88 15 1,320 Total Cost $2,445 Time Ticket No. 3923 Name: Mary Jones Work Description: Knitting/piecing Dates Job No. Hours Worked Unit Price Amount 12/01-12/15 62 $15 $900 12/16-12/31 83 15 1,635 60 109 Total Cost $2,535 Job Cost Sheets On December 10, POGP Company receives an order for 200 sweater vests and assigns Job 83 to the order. Review the Materials Requisition table to add the materials to the Job Cost Sheet for Job 83. On December 15, review the Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 62 for the period December 1 through December 15. On December 31, the last work day of the year for the knitters, review Time Ticket tables to add the appropriate amount of direct labor and factory overhead costs to the Job Cost Sheet for Job 83 for the period December 16 through December 31. If there is no amount or an amount is zero, enter "0". If required, round your answers to the nearest cent. If there is no amount or an amount is zero, enter "0". If required, round your answers to the nearest cent. Job 62 100 units: Sweaters Direct Materials Direct Labor Factory Overhead Total Balance Dec. 1 $5,000 $300 $104 $5,404 Dec. 15 4,000 x 3,120 x 7,120 X Total Cost $ 5,000 4,300 x $ 3,224 X $ 12,524 x Unit Cost 125.24 x Job 83 200 units: Sweater vests Direct Materials Direct Labor Factory Overhead Total Job Cost Balance Dec. 1 0 $0 $0 $0 $0 Dec. 10 3,000 X 3,000 X Dec. 31 6,000 x 4,680 X 10,680 x Total Cost $ 3,000 X $ $ 6,000 x $ 4,680 X $ 13,680 x Feedback Check My Work Recall that the factory overhead is applied for this company using direct labor hours (DLH). Journal On December 10, POGP Company receives an order for 200 sweater vests and assigns Job 83 to the order. Review the Materials Requisition table to journalize the entry to record the addition of the materials to Work in Process. If an amount box does not require an entry, leave blank. Dec. 10 Work in Process 3,000 X Materials 3,000 X Feedback Check My Work Think about the flow of costs incurred to do a job and the accounts affected by sales to customers. On December 15, review the Time Ticket tables to journalize the entry to record the addition of direct labor to Work in Process for the period December 1 through December 15. If an amount box does not require an entry, leave it blank. Work in Process Dec. 15 4,000 X Wages Payable 4,000 X Feedback Check My Work Partially correct On December 15, review the Time Ticket tables to journalize the entry to record the addition of factory overhead to Work in Process for the period December 1 through December 15. If an amount box does not require an entry, leave it blank. Dec. 15 Work in Process 3,120 X Factory Overhead 3,120 X Feedback Check My Work Partially correct On December 21, Job 62 is completed. Review the Job Cost Sheets and your journal entries. Journalize the entry to move the associated costs to the finished goods account. If an amount box does not require an entry, leave it blank. Dec. 21 Finished Goods 12,524 Work in Process 12,524 Feedback Check My Work Partially correct On December 22, 75 of the 100 sweaters from Job 62 are sold on account for $125 each. Journalize the following transactions: a. The entry to record the sale. b. The entry to record the transfer of costs from Finished Goods to Cost of Goods Sold. If an amount box does not require an entry, leave it blank. Dec. 22 Accounts Receivable 9,375 Sales 9,375 Dec. 22 Cost of Goods Sold 9,393 Finished Goods 9,393 x Feedback Check My Work Partially correct On December 31, the last work day of the year for the knitters, review the Time Ticket tables to journalize the entry to record the addition of direct labor to Work in Process for the period December 16 through December 31. If an amount box does not require an entry, leave it blank. Dec. 31 Work in Process 6,000 X Wages Payable 6,000 On December 31, the last work day of the year for the knitters, review the Time Ticket tables to journalize the entry to record the addition of factory overhead to Work in Process for the period December 16 through December 31. If an amount box does not require an entry, leave it blank. Dec. 31 Work in Process 4,680 X Factory Overhead 4.680 X Feedback Check My Work Partially correct On December 31, journalize the following transactions. Note that expenses (b), (c), and (d) were paid in cash. a. One month's depreciation on equipment b. One month's payroll for all employees C. One month's rent of $1,000 d. One month's factory utilities of $1,275 If an amount box does not require an entry, leave it blank. Dec. 31 Factory Overhead 3,275 X Wages Expense 6,250 X Accumulated Depreciation-Equipment x 100 X Cash 9,525 X Accumulated Depreciation-Equipment 100 Feedback Check My Work Partially correct On December 31, prepare the journal entry to dispose of the balance in the factory overhead account. If an amount box does not require an entry, leave it blank. Dec. 31 Cost of Goods Sold 1,150 Factory Overhead 1,150 X Feedback Check My Work Partially correct Final Question What are the balances in the following accounts as of December 31? If an amount is zero, enter "O". Materials 1,500 Work in Process $ 11,060 x Finished Goods $ 2,611 x Factory Overhead $ -1,165 x Cost of Goods Sold $ 261,723 x Feedback Check My Work Create T accounts and post the beginning balances from the Nov. 30 Trial Balance panel. Then post your journal entries to get the Dec. 31 account balances