Mini-Practice Set One - InstructionsJob Order Cost AccountingYou have learned how to account for the basic elements of manufacturing costs. This practice setcombines these various techniques and principles in a practical application for Storage Solutions, Inc.You will be required to perform the duties not only of the cost accountant but also of the storeroomclerk, voucher clerk, and other factory personnel.Storage Solutions, Inc.Storage Solutions, Inc. is a manufacturer of modular storage and media units for the home and office.The components manufactured by the company include bookcases, entertainment centers, and shelvingunits. These products are popular because of their trendy design features and ability to be arranged inmultiple configurations. Production is divided between custom orders and standard modelsmanufactured for stock.The Production Division consists of three producing departments and two service departments. Theproducing departments are Shaping, Assembly, and Finishing. The service departments are BuildingServices and General Factory. The production process begins in the Shaping Department, where wood,glass, and plastic are shaped into the component parts that make up the finished units. These parts aretransferred to the Assembly Department where they are assembled. In the Finishing Department, avariety of finishes are applied and hardware is attached to the assembled units. The Building Servicesand General Factory departments perform activities similar to those described for Grand Slam Uniformsin the textbook. Finished products are sold to home furnishing stores across the country.Cost Accounting SystemStorage Solutions cost accounting system includes a number of journals, ledgers, and cost accountingforms. All forms are provided. Entries have been made on these forms where indicated.JournalsThe seven journals used for making original entries are listed here, as are the initials to be used forposting references.Voucher Register VRMaterials Requisition Journal MRReturned Materials Journal RMManufacturing Overhead Applied Journal MOACompleted Jobs Journal CJSales Journal SGeneral Journal (vouchers) JGeneral LedgerThe firms chart of accounts includes the following accounts, relating to the flow of manufacturing costs.The balances as of June 1, 2006 are given and have been recorded for you in the general ledgeraccounts.121 Raw Materials $50,784.00122 Work in Process 13,728.73126 Finished Goods 28,648.70401 Sales 0415 Cost of Goods Sold 0500 Factory Payroll Clearing 20,480.00501 Manufacturing Overhead Control 0502 MOH Shaping Department 0503 MOH Assembly Department 0504 MOH Finishing Department 0505 MOH Building Services Department 0506 MOH General Factory Department 0507 Overapplied or Underapplied MOH (Dr.) 5,194.00Subsidiary LedgersFour subsidiary cost ledgers are used, and the necessary forms are provided for you. Storage Solutionsuses the FIFO method of costing all inventories.Materials LedgerIn order to simplify the work in this project, the materials ledger, which actually contains several dozenmaterials ledger cards, has been condensed to four cards showing the activities up to the close ofbusiness on June 25. You will make detailed entries for Materials S-16 (shelves, 52 x 13), T-23(tempered glass panels), and P-42 (polishing cloths). All other materials are summarized in total on thefourth materials ledger card, and no entries are required on it.Job Cost LedgerThe job cost ledger currently consists of four job cost sheets. Job 211 was begun in May; Jobs 218, 219,and 220 were started in June. Various entries have been posted through June 25.Departmental Overhead Analysis SheetsOverhead analysis sheet are provided for each of the five departments in the organization: Shaping,Assembly, Finishing, Building Services, and General Factory. The first entry on each sheet summarizesthe postings of June 1 through June 25.Finished Goods LedgerThe finished goods ledger consists of three stock cards showing all postings through June 25. You willmake entries involving two types of finished goods bookcases (Stock 129) and shelving units (Stock458) as required during the remainder of the month. All other types of finished goods are summarizedon the third card, and no entries are required on it.TRANSACTIONSRecord the following daily transactions in the proper journals. Post to the subsidiary ledgers daily.June 26Materials IssuedRequisition 613 for 50 units of Material T-23 for Job 211. Requisition 614 for 120 units of Material S-16for Job 218.When you record a requisition for direct materials, you will perform the duties of both the storeroomclerk and the cost clerk (see Chapter 3). The following recording steps are required:1) Compute the cost and enter the requisition on the materials ledger card.2) Record the appropriate entries in the materials requisition journal.3) Post to the job cost sheet.June 27Materials Received300 units at $15.95 each of Material S-16, obtained on Purchase Order 2194, from the GlenshawFabricating Company, Voucher 6-72.When you record the receipts of materials, you will perform the work normally assigned to thestoreroom clerk and the voucher clerk (see Chapter 2). The following recording steps are required:1) Record the receipt on the materials ledger card.2) Enter the voucher in the voucher register.Materials IssuedRequisition 615 for 14 units of Material T-23 for Job 220.June 28Materials IssuedRequisition 616 for 190 units of Material S-16 for Job 219. Requisition 617 for 110 units of Material P-42for the Assembly Department.Remember that issues of indirect materials require a different recording procedure (see Chapter 3):1) Enter the issue on the materials ledger card.2) Record the issue in the materials requisition journal.3) Post to the departmental overhead analysis sheet.Sale of Finished GoodsSold 50 bookcases (Stock 129) to the Hornes Department Store for $160.50 each on Invoice 716; terms2/10, n/30.For sales, the following recording steps are required (see Chapter 10):1) Enter the issue on the finished goods stock ledger card.2) Record the sale in the sales journal.June 29Materials IssuedRequisition 618 for 490 units of Material T-23 for Job 219. Requisition 619 for 130 units of Material P-42for the Finishing Department.Materials Received1,000 units at $2.25 each of Material T-23, obtained on Purchase Order 2195, from the Ambridge GlassCompany, Voucher 6-73.Services ReceivedRepairs to equipment in the Shaping Department performed by South Side Repair for $310, Voucher 6-74.For transactions of this type, the following recording steps are required (see Chapter 7):1) Enter the voucher in the voucher register.2) Post to the departmental overhead analysis sheet.Sale of Finished GoodsSold 120 shelving units (Stock 458) to Room Concepts for $32 each on Invoice 717; terms 2/10, n/30.June 30Materials IssuedRequisition 620 for 350 units of Material T-23 for Job 218. Requisition 621 for 210 units of Material P-42for the Finishing Department.Materials Returned to Storeroom25 units of Material T-23, originally issued on June 26, Requisition 613, for Job 211. Returned Materialsreport 70 has been prepared.Complete the entries normally made by the storeroom clerk and the cost clerk (see Chapter 3). Thefollowing recording steps are required:1) Determine the cost and make the entry (in parentheses) in the Issued section of the materialsledger card.2) Post to the job cost sheet.3) Record the return in the returned materials journal.Sale of Finished GoodsSold 55 shelving units (Stock 458) to the Innovative Design Company for $32 each on Invoice 718; terms2/10, n/30.Services ReceivedUtilities for factory operations in June, payable to Edison Utilities, Voucher 6-75. The cost of $3,062should be allocated as follows to the departments:Shaping $902.00Assembly 390.00Finishing 290.00Building Services 903.00General Factory 577.00INTERIM PROCEDURESComplete the necessary recording and posting relating to the weekly and semimonthly payrolls.Weekly Payroll RegisterThe weekly payroll register for June 24 through June 30 shows the following:Gross earnings $26,490.00Social Security taxes withheld 1,642.38Medicare taxes withheld 397.36Income taxes withheld 4,529.86Group insurance withheld 364.66Record the payroll using a general journal voucher (6-1), since the factory payroll register is notprovided. Then post the gross earnings to the Factory Payroll Clearing account. Other items are notposted because no accounts are provided for them.Analysis of Time TicketsAll analysis of the time tickets for the week ended June 30 is shown below. The following recording stepsare required:1) Post direct labor to the job cost sheets.2) Post indirect labor to the departmental overhead analysis sheets.STORAGE SOLUTIONS, INC.Analysis of Time TicketsWeek Ended June 30, 2006DIRECT LABORSHAPING ASSEMBLY FINISHINGJOB HOURS AMOUNT HOURS AMOUNT HOURS AMOUNT TOTAL211 185 $1,526.80 110 $1,248.00 $2,774.80218 113 $958.00 133 1,103.90 148 1,702.00 3,763.90219 235 2,021.00 356 2,954.80 240 2,760.00 7,735.80220 285 2,451.00 165 1,369.50 0 0.00 3,820.50Total: 633 $5,430.00 839 $6,955.00 498 $5,710.00 $18,095.00INDIRECT LABORDEPARTMENTREGULAREARNINGSOVERTIMEPREMIUM TOTALShaping $900.00 $529.00 $1,429.00Assembly 1,530.00 0.00 1,530.00Finishing 833.00 426.00 1,259.00Building Services 1,842.00 0.00 1,842.00General Factory 2,335.00 0.00 2,335.00Total: $7,440.00 $955.00 $8,395.00Semimonthly Payroll RegisterThe semimonthly payroll register for June 16 through June 30 shows the following:Gross earnings $6,056.00Social Security taxes withheld 375.48Medicare taxes withheld 151.40Income taxes withheld 1,217.25Group insurance withheld 160.56Enter as you did the weekly payroll, using a general journal voucher (6-2).Analysis of Semimonthly PayrollAn analysis of the semimonthly payroll for June 16 through June 30 shows the following charges to beposted to the respective departmental overhead analysis sheets:Building Services $1,756.00General Factory 4,300.00Total: $6,056.00END-OF-MONTH PROCEDURESThe end-of-month procedures for Storage Solutions will be completed in the order in which you studiedthe cost accounting elements: materials, labor, and manufacturing overhead.MaterialsTotal the following journals and post to the appropriate general ledger accounts:1) Voucher register2) Materials requisition journal3) Returned materials journalLaborA summary of factory wages for the month must be completed before labor costs can be charged toproduction.1) Enter the weekly payroll figures for the week ended June 30 (see above) and the semimonthlypayroll for the period ended June 30 in the partially completed monthly summary provided.2) Total the summary and compute the total direct labor and indirect labor.3) Prepare a general journal voucher (6-3) to transfer the cost of labor used during the month fromFactory Payroll Clearing 500 to Work in Process 122 (direct labor) and to ManufacturingOverhead Control 501 (indirect labor).4) Post to the general ledger accounts supplied.Next, the employers payroll taxes for the month must be entered in the accounting records. Thesummary of taxable factory wages for June is on the following page. (Note: SUTA is used for stateunemployment insurance tax.)STORAGE SOLUTIONS, INC.Summary of Taxable Factory WagesJune 2006WAGES SUBJECT TO:DEPARTMENT SOCIAL SECURITY TAX MEDICARE TAX FUTA AND SUTA TAXESShaping $30,085.00 $30,085.00 $4,330.60Assembly 35,774.00 35,774.00 4,650.60Finishing 30,397.00 30,397.00 2,929.60Building Services 11,231.00 11,231.00 1,295.60General Factory 18,003.00 18,003.00 1,590.60Total: $125,490.00 $125,490.00 $14,797.001) Prepare a summary of payroll taxes for June similar to the one shown on page 135 of thetextbook. Use the following rates: Social Security (6.2%), Medicare (1.5%), FUTA (0.8%), andSUTA (3.8%).2) Post from the schedule to the departmental overhead analysis sheets.3) Prepare a journal voucher (6-4) to record the payroll taxes.4) Post to the general ledger account Manufacturing Overhead Control 501.Manufacturing OverheadOverhead costs include both fixed and variable elements. Use the schedule of monthly fixed overheadcharges for Storage Solutions (see below) as a basis for the following steps:1) Prepare a general journal voucher (6-5) to record the fixed overhead costs.2) Post to the Manufacturing Overhead Control account.3) Post to the departmental overhead analysis sheets.STORAGE SOLUTIONS, INC.Schedule of Monthly Fixed Overhead ChargesYear 2006DEPARTMENTDEPRECIATIONMACHINERYAND EQUIP.DEPRECIATIONBUILDINGSPROPERTYTAXESPROPERTYINSURANCE TOTALShaping $1,159.00 $0.00 $82.00 $49.00 $1,290.00Assembly 235.00 0.00 58.00 12.00 305.00Finishing 622.00 0.00 72.00 22.00 716.00Building Services 286.00 1,525.00 277.00 47.00 2,135.00General Factory 888.00 0.00 145.00 65.00 1,098.00Total: $3,190.00 $1,525.00 $634.00 $195.00 $5,544.00Workers compensation insurance is estimated as follows for the departments:Shaping $324Assembly 360Finishing 194Building Services 48General Factory 106To enter these costs, perform the following steps:1) Prepare a general journal voucher (6-6) to record workers compensation insurance. CreditWorkers Compensation Insurance Payable 218.2) Post to the Manufacturing Overhead Control account.3) Post to the departmental overhead analysis sheets.Applying Overhead to Completed GoodsOverhead costs are ordinarily applied to finished goods as soon as possible after the factory operationsare completed. Jobs 218 and 219 were completed on June 30. Perform the following procedures foreach job:1) Compute and enter the applied overhead on the job cost sheets. The following overhead ratesare to be used:Shaping $8.50 per direct labor hourAssembly $7.80 per direct labor hourFinishing $8.40 per direct labor hour2) Record the amount of overhead applied in the manufacturing overhead applied journal.3) Total all columns of the job cost sheets and complete the summary block on the job cost sheets.Applying Overhead to Work in ProcessJobs 211 and 220 are incomplete at the end of June. Use the following procedures to apply overhead tothese jobs:1) Compute and enter the overhead to be applied for the month on the job cost sheets. Use theoverhead rates given above for Jobs 218 and 219.2) Record the amount of overhead applied in the manufacturing overhead applied journal.3) Foot the columns of the job cost sheets.Summary of Manufacturing Overhead CostsManufacturing overhead costs are drawn together by completing a monthly summary, as follows:1) Total the departmental overhead analysis sheets.2) Prepare a schedule of departmental overhead costs similar to the one shown on page 153 of thetextbook.3) Prepare a general journal voucher (6-7) to close Manufacturing Overhead Control 501 into thedepartmental manufacturing overhead accounts.4) Post to the general ledger accounts involved.Allocating Service Department CostsThe allocation of service departments to the producing departments is made easier by the preparationof a worksheet similar to the one shown on page 156 of the textbook. Building Services Departmentcosts are to be allocated on the basis of floor space occupied, as indicated on the next page.Department Square Feet PercentGeneral Factory 21,840 28Shaping 23,400 30Assembly 11,700 15Finishing 21,060 27Total: 78,000 100General Factory Department costs are to be allocated on the basis of direct labor costs shown by thefactory wage summary for June that you have already prepared.1) Complete the allocation worksheet.2) Prepare general journal vouchers (6-8 and 6-9) to apportion the service department costs to theproducing departments.3) Post to the general ledger accounts.Overapplied and Underapplied OverheadSince the months activities are complete, total the manufacturing overhead applied journal to preparethe way for the following steps:1) Post the totals to the Work in Process account and to the appropriate departmental overheadaccounts in the general ledger.2) Close the balances of the departmental overhead accounts into Overapplied or UnderappliedManufacturing Overhead 507 by doing the following:a. Prepare a general journal voucher (6-10).b. Post the entry to the general ledger accounts involved. (The balance of Account 507 iscontinued from month to month.)Completion of JobsJobs 218 and 219 were completed during the period and all costs have been totaled and summarized onthe job cost sheets. Therefore, the following steps are to be performed:1) Record completion of the two jobs in the completed jobs journal.2) Total the completed jobs journal and post.3) Since Job 218 was for stock, record the receipt of 100 chairs (Stock 129) on the finished goodsstock ledger card.Sale of Finished GoodsJob 219 was manufactured for Quality Home Interiors Company and is shipped immediately uponcompletion on June 30. The sale, amounting to $47,300, is covered by Invoice 719; terms 2/10, n/30.1) Enter the sale in the sales journal.2) Since this is the final sale of the month, total the sales journal.3) Post to the accounts supplied.SchedulesSchedules are prepared to prove the balances of the subsidiary ledgers to their control accounts in thegeneral ledger before any financial statements are prepared.1) Prepare a schedule of raw materials. Compare the total with the balance of Raw Materials 121.2) Prepare a schedule of work in process. Compare the total with the balance of Work in Process122.3) Prepare a schedule of finished goods. Compare the total with the balance of Finished Goods126.StatementsThe final cost data are now ready for inclusion in the monthly financial statements. Assume sellingexpenses of $17,768.00 and general expenses of $10,104.00, estimate federal income tax at 15% of netincome for the period, and complete the following statements.1) Schedule of manufacturing overhead for June.2) Statement of cost of goods manufactured for June.3) Income statement covering June operations.

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