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Exercise 2-2 (also in your book at end of chapter)

Stine Company uses a job order cost system.

On May 1, the company has a balance in Work in Process Inventory of $3,500 and two jobs in process: Job No. 429 $2,000, and Job No. 430 $1,500.

During May, a summary of source documents reveals the following.

Job Number	Materials Requisition Slips			Labor Time Tickets
429	2,500			1,900
430	3,500			3,000
431	4,400	10,400		7,600	12,500
General use		800			1,200
		11,200			13,700

Stine Company applies manufacturing overhead to jobs at an overhead rate of 60% of direct labor cost. Job No. 429 is completed during the month.

Instructions

(a) Prepare FOUR summary journal entries to record (1) the requisition slips, (2) the time tickets, (3) the assignment of mfg overhead to jobs, and (4) the completion of Job No. 429.

Instructors Note: Beginning WIP (Work-In-Process as of May01) has $3,500 composed of amounts already transferred in for jobs 429 and 430 as stated in the problem. (FYI: The 3,500 under Job 430 in Materials Requisition is NOT the same 3,500 that is in WIP they are different 2 different things).

Instruction (a) needs an entry transferring the TOTAL of 10,400 (the summary of the job costs) from (out of) RAW MAT INV into WIP. Hence PART of the first entry increases the asset WIP and decreases the asset RAW MAT INV by $10,400. (How do you know to debit WIP? The three job costs being transferred, totalling $10,400 are Direct Materials - since they are associated with a specific job #. Indirect costs are not associated with any specific job #. They are considered factory-wide use or general use.

The other part of the first entry involves increasing the asset MFG OH (manufacturing overhead) by the general use materials. Therefore, debit the asset MFG OH (a control account) and decrease the asset RAW MAT by another $800. (Your credit amount should be the total of both debits.)

Materials

Labor

Overhead