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 a 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 knitters time, the rest of the knitters 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, 20Y8Account TitleDebitCreditCash20,000 Accounts Receivable1,000 Supplies200 Materials5,000 Work in Process5,404 Equipment12,000 Accumulated Depreciation-Equipment 825Accounts Payable 150Common Stock 10,000Retained Earnings 12,000Dividends18,096 Sales 307,500Cost of Goods Sold255,040 Factory Overhead 15Wages Expense13,750 330,490330,490

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$1,200Estimated total Office Manager/Knitting Supervisor wages$30,000Estimated office utilities$6,000Estimated factory utilities$4,800Estimated factory rent$12,000

Activity Base Data Estimated number of DLH for the year6,250Estimated number of MH for the year4,375

Compute the predetermined factory overhead rate for the current year.

$5.28 per DLH$7.54 per DLH$7.68 per DLH$8.64 per DLH Another amount per DLH

Materials Requisition Date: Dec. 10Req. No. 12255Job No. 83 DescriptionQty. IssuedUnit PriceAmountYarn type B600 skeins$5$3,000 Total issued$3,000

Time TicketNo. 1255Name:Susan Blake Work Description:Knitting/piecing DatesJob No.Hours WorkedUnit PriceAmount12/01-12/1562 65 $20 $1,30012/16-12/3183 103 20 2,060 Total Cost$3,360

Time TicketNo. 2274Name:Josh Porter Work Description:Knitting/piecing DatesJob No.Hours WorkedUnit PriceAmount12/01-12/156275$20$1,50012/16-12/318388201,760 Total Cost$3,260

Time TicketNo. 3923Name:Mary Jones Work Description:Knitting/piecing DatesJob No.Hours WorkedUnit PriceAmount12/01-12/1562 60 $20$1,20012/16-12/3183 109 202,180 Total Cost$3,380

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.

Job 62100 units:Sweaters Direct MaterialsDirect LaborFactory OverheadTotalBalance Dec. 1$5,000$300$104$5,404Dec. 15 Total Cost Unit Cost

Job 83200 units:Sweater vests Direct MaterialsDirect LaborFactory OverheadTotal Job CostBalance Dec. 1$0$0$0$0Dec. 10 Dec. 31 Total Cost

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 it blank.

Dec. 10Cash Cost of Services Materials Factory Overhead Work in Process- Select -- Select - Cash Cost of Services Materials Factory Overhead Work in Process- Select -- Select -

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.

Dec. 15Accounts Receivable Cash Salaries Payable Wages Payable Work in Process- Select -- Select - Accounts Receivable Cash Salaries Payable Wages Payable Work in Process- Select -- Select -

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. 15Accounts Payable Accounts Receivable Factory Overhead Salaries Payable Work in Process- Select -- Select - Accounts Payable Accounts Receivable Factory Overhead Salaries Payable Work in Process- Select -- Select -

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. 21Accounts Payable Cash Finished Goods Factory Overhead Work in Process- Select -- Select - Accounts Payable Cash Finished Goods Factory Overhead Work in Process- Select -- Select -

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. 22Cash Accounts Receivable Factory Overhead Sales Work in Process- Select -- Select - Cash Accounts Receivable Factory Overhead Sales Work in Process- Select -- Select -Dec. 22Accounts Payable Accounts Receivable Cash Cost of Goods Sold Finished Goods- Select -- Select - Accounts Payable Accounts Receivable Cash Cost of Goods Sold Finished Goods- Select -- Select -

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. 31Accounts Payable Accounts Receivable Cost of Services Wages Payable Work in Process- Select -- Select - Accounts Payable Accounts Receivable Cost of Services Wages Payable Work in Process- Select -- Select -

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. 31Accounts Payable Cash Factory Overhead Salaries Payable Work in Process- Select -- Select - Accounts Payable Cash Factory Overhead Salaries Payable Work in Process- Select -- Select -

On December 31, journalize the following transactions. Note that expenses (b), (c), and (d) were paid in cash.

a. One months depreciation on equipment

b. One months payroll for all employees

c. One months rent of $1,000

d. One months factory utilities of $1,275

If an amount box does not require an entry, leave it blank.

Dec. 31Accounts Receivable Accumulated Depreciation-Equipment Cash Cost of Services Factory Overhead- Select -- Select - Accounts Receivable Accumulated Depreciation-Equipment Cash Cost of Services Wages Expense- Select -- Select - Accounts Receivable Accumulated Depreciation-Equipment Cash Cost of Services Wages Payable- Select -- Select - Accounts Receivable Cash Factory Overhead Wages Expense Wages Payable- Select -- Select - Accounts Receivable Accumulated Depreciation-Equipment Factory Overhead Wages Expense Wages Payable- Select -- Select -

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. 31Accounts Receivable Cash Cost of Goods Sold Factory Overhead Salaries Payable- Select -- Select - Accounts Receivable Cash Cost of Goods Sold Factory Overhead Salaries Payable- Select -- Select -

What are the balances in the following accounts as of December 31? If an amount is zero, enter "0".