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PA 2 - 5 ( Algo ) Recording Manufacturing Costs and Analyzing Manufacturing Overhead [ LO 2 - 3 , 2 - 4 , 2
PAAlgo Recording Manufacturing Costs and Analyzing Manufacturing Overhead LO
Christopher's Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs.
Inventory balances at the beginning of the current year follow:
The following transactions occurred during January:
a Purchased materials on account for $
b Issued materials to production totaling $ percent of which was traced to specific jobs and the remainder of which was
treated as indirect materials.
c Payroll costs totaling $ were recorded as follows:
$ for assembly workers
$ for factory supervision
$ for administrative personnel
$ for sales commissions
d Recorded depreciation: $ for factory machines, $ for the copier used in the administrative office.
e Recorded $ of expired insurance. Forty percent was insurance on the manufacturing facility, with the remainder classified as
an administrative expense.
f Paid $ in other factory costs in cash.
g Applied manufacturing overhead at a rate of percent of direct labor cost.
h Completed all jobs but one; the job cost sheet for the uncompleted job shows $ for direct materials, $ for direct labor,
and $ for applied overhead.
i Sold jobs costing $ The revenue earned on these jobs was $
Required:
Set up Taccounts, record the beginning balances, post the January transactions, and compute the final balance for the following
accounts:
a Raw Materials Inventory.
b Work in Process Inventory.
c Finished Goods Inventory.
d Cost of Goods Sold.
e Manufacturing Overhead.
f Selling, General, and Administrative Expenses.
g Sales Revenue.
Determine how much gross profit the company would report during the month of January before any adjustment is made for the
overhead balance.
Determine the amount of over or underapplied overhead.
Compute adjusted gross profit assuming that any over or underapplied overhead balance is adjusted directly to Cost of Goods
Sold.
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