Mastery Problem: Job Order Costing Purt of Great Price Company Maria Young is the sole stockholder of Purt 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 ofice 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 pleong 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 84,800, with the some anticipated useful life and salvage value Nov. 30 Trial Balance POGP Company Trial Balance November 30, 2018 Account Title Debit Credit Cash 20,000 1,000 Accounts Receivable Supplies 200 Materials 5,000 5,000 5,401 12,000 Materials Work in Process Equipment Accumulated Depreciation Equipment Accounts Payable Cornon Stock 825 150 10,000 12,000 Retained Earnings Dividends 18,096 Sales 307,500 Cost of Goods Sold 255,040 15 Factory Overhead 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 $36,000 Estimated office utilities $6,000 Estimated Selected Amounts for the Year Estimated depreciation on equipment $1,200 Estimated total Omce Manager/Knitting Supervisor wages $6,000 Estimated office utilities $6,000 Estimated factory utilities $1,800 Estimated factory rent $12,900 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. $5.76 per DLH Materials Requisition Date: Dec, 10 Reg. No. 12255 Job No. 83 Description Amount Qty. Issued Unit Price Yarn type B 700 skeins $5 $3,500 $3,500 Total Issued Materials Requisition Date: Dec, 10 Reg. No. 12255 Job No. B3 Description Qty. Issued Unit Price Amount Yamn type B 700 skeins $5 $3,500 Total Issued $3,500 Time Ticket No. 1255 Name: Susan Blake Work Description: Knitting/piecing Dates Job No. Hours Worked Unit Price Amount 62 65 $20 12/01-12/15 12/16-12/31 $1,300 2,060 83 103 20
