PA2-5 (Algo) Recording Manufacturing Costs and Analyzing Manufacturing Overhead [LO 2-3, 2-4, 2-5] 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: Raw Materials Inventory Work in Process Inventory Finished Goods Inventory $ 15,600 6,800 21,500 The following transactions occurred during January: a. Purchased materials on account for $27,600. b. Issued materials to production totaling $20,800, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials. c. Payroll costs totaling $17,000 were recorded as follows: $10,400 for assembly workers $1,900 for factory supervision $2,400 for administrative personnel $2,300 for sales commissions d. Recorded depreciation: $4,900 for factory machines, $1,200 for the copier used in the administrative office. e. Recorded $1,000 of expired insurance. Forty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense. f. Paid $5,700 in other factory costs in cash. g. Applied manufacturing overhead at a rate of 200 percent of direct labor cost. h. Completed all jobs but one; the job cost sheet for the uncompleted job shows $2,200 for direct materials, $2,200 for direct labor, and $4,400 for applied overhead. i. Sold jobs costing $51,600. The revenue earned on these jobs was $67,080. Required: 1. Set up T-accounts, 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. 2. Determine how much gross profit the company would report during the month of January before any adjustment is made for the overhead balance. 3. Determine the amount of over- or underapplied overhead. 4. Compute adjusted gross profit assuming that any over- or underapplied overhead balance is adjusted directly to Cost of Goods Sold. Required 1 Required 2 Required 3 Required 4 Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts: Note: Post all amounts separately. Do not combine/add any dollar amounts when posting to the T-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. Raw Materials Inventory Work in Process Inventory Debit Credit Debit Credit Beginning Balance 15,600 Beginning Balance 6,800 Ending Balance Ending Balance Finished Goods Inventory Cost of Goods Sold Debit Credit Debit Credit Beginning Balance 21,500 Beginning Balance Ending Balance Ending Balance Manufacturing Overhead Selling, General, and Administrative Expenses Debit Credit Debit Credit Beginning Balance Beginning Balance Ending Balance Beginning Balance Ending Balance Sales Revenue Debit Credit Ending Balance Unadjusted Gross Profit Manufacturing Overhead Adjusted Gross Profit