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JOB ORDER COST SYSTEM: Use the T-accounts on the next page to record the following entries for Jen Manufacturing using a Job Order Cost system. Be sure to carefully review the text and other resources before attempting this problem. 1) Purchased raw materials on account costing $20,000. 2) Materials costing $13,000 were requisitioned for use in making specific customer jobs (Job 1: $6,000 and Job 2: $7,000). An additional $1,000 in materials was requisitioned for general factory use 3) A total of $17,300 was incurred in wages for the period to be paid next month. Jen Manufacturing determined that $7,800 wages were payable to direct laborers (Jab 1: $4,000 and Job 2: $3,800). An additional $9,500 were payable to factory employees who do not work directly on Jen's products. 4) Utilities expenses on the factory totaling $5,000 were paid in cash. 5) $3,700 in depreciation was recorded on factory machines. 6) Jen uses machine hours to apply Manufacturing Overhead to production. The Estimated Manufacturing Overhead for the year was $250,000. The Estimated Machine Hours for the year were 5,000 hours. Calculate the Predetermined Overhead Allocation Rate: a. Predetermined Overhead Rate Estimated MOH Estimated Activity Base Machine Hours per Machine Hour b. Use the Predetermined Overhead Allocation Rate to apply Manufacturing Overhead to production. Jen's actual usage was 400 machine hours during the period (Job 1: 150 hours and Job 2: 250 hours). Record your entries in the T-accounts machine hours= S per Machine hour X Job 1 Allocation: S Job 2 Allocation: per Machine hour X machine hours S 7) Job 1 was completed and transferred to Finished Goods Inventory. Use the Job Cost Sheet below to summarize the Job 1 costs. Allocated MOH Job Cost Sheet: Direct Direct Labor TOTAL Materials Job 1 $ S 8) Job 1 Products were sold on account to customers for $55,000. The cost of these products was calculated in Step 7. Be sure to record both entries (i.e. the sale and the cost) Raw Materials Inventory Work in Process Inventory Manufacturing Overhead Cash Beg:25,000 Beg: 300 Accumulated Finished Goods Accounts Receivable Depreciation Wages Payable Inventory Accounts Payable Sales Cost of Goods Sold The beginning balance in the Manufacturing Overhead account was $300. After all of the entries have been recorded for the period, what is the balance in the Manufacturing Overhead account? Is the balance Under or Over-Allocated? Manufacturing Overhead Balance? Under or Over-Allocated? 9) Make the adjusting entry to close out the Manufacturing Overhead balance to Cost of Goods Sold. PROCESS COST SYSTEM: Weighted Average Method: Carefully review the completed example below. Then, use these concepts to complete Exercise 2 that follows Completed Example: Advanced Technologies produces notebook computers in two departments: Assembly and Finishing. During both the Assembly and Finishing stages, Direct Materials, Direct Labor and Manufacturing Overhead are incurred and tracked using a process costing system (weighted average method). Consistent with a process costing system, the flow of costs are tracked by stage (i.e. department) rather than by job or cost object Assembly Finishing Finished Goods The T-accounts that follow the problem steps display the beginning account balances in the relevant accounts as of January 1, 2019. Note that there are two Work-in-Process (WIP) accounts, one for each department (Assembly and Finishing). The beginning balances in these accounts represent the partially completed inventory carmied over from December to January. Use a process cost system to record the following entries for the Assembly dept. in the T-accounts (last page) for the year 2019.. 1. Advanced Tech. used cash to purchase raw materials in the amount of $78,000. 2. Transferred $56,000 af raw materials to the Assembly department for use in the assembly phase. 3. Paid $98,000 cash to Assembly department employees who work directly with the product. 4. Advanced Tech. uses Direct Labor Hours to estimate a Predetermined Overhead Rate at the start of each year. Advanced estimates total Manufacturing Overhead costs to be $119,600 for 2019 with estimated Direct Labor Hours of 26,000 hrs. Start by calculating the Predetermined Overhead Rate for 2019 Estimated MOH Estimated Activity Base Predetermined Overhead Rate $ 119,600 26,000 Direct Labor hrs $4.60 per DL hour The Assembly department incurred 14,000 of direct labor hours during 2019. Use the rate above to calculate overhead for the WIP-Assembly account and record the entry Predetermined Overhead Rate Activity Allocation to WIP $ 64,400 $ 4.60 14,000 DL hours 5. The beginning inventory in the WIP-Assembly account consisted of 45 partially completed units. Another 430 units were started in the Assembly department in 2019. Advanced Tech.. transferred 390 units to the Finishing department during 2019. Summarize the units in Assembly department Description Units to Account for Beginning WIP-Assembly Add: Units Started Physical Units 45 430 Total Units to Account for: Less: Units transferred to Finishing Units in Ending Inventory 475 (390) 85 The costs in the WIP-Assembly account must be allocated (split) between the 85 partially completed units (as for Assembly) still in ending inventory and the 390 units transferred to the Finishing department. A production engineer for Advanced Tech. estimates that the 85 units in ending inventory are 60 % complete for the Assembly phase. Of course, the 390 units transferred are 100 % complete (for Assembly). Calculate the Equivalent Units of Production: Description Whole Equivalent Units Equiv Unit % Units Transferred to Finishing 390 100% 390 Ending WIP 85 60% 51 Total 475 441 Next, calculate a Cost per Equivalent Unit Description WIP Assembly Costs: Beginning WIP-Assembly Cost 23,400 Materials added to WIP 56,000 Labor added to WIP 98,000 MOH added to WIP 64.400 $241,800 Subtotal: Divide by Equivalent Units 441 Cost per Equivalent Unit (rounded) 548.30 Finally, use the Cost per Equivalent Unit above to allocate the total assembly costs and record the necessary entry to credit WIP-Assembly and debit WIP-Finishing: Description Allocated S 213,837 Equiv. Units X Cost per Unit $ 548.30 Transferred Units 390 X $ 548.30 Ending WIP 51 X 27,963 = S 241,800 TOTAL Now, record the following entries for the Finishing department for 2019. Use the T- accounts on the last page. If you get stuck, be sure to carefully review the previous example and the text and other resources 6. Transferred $42,000 of raw materials to the Finishing department for use in the Finishing phase. 7. Paid $74,000 cash to Finishing department employees working directly with the product. 8. The Finishing department incurred 11,000 of direct labor hours during 2019. Use the same Predetermined Overhead Rate (calculated in the completed example above) to allocate overhead to the WIP-Finishing account and record the entry. Predetermined Overhead Rate X Activity Allocation to WIP $ DL hours 9. The beginning inventory in the WIP-Finishing account consisted of 24 partially completed units. During 2019, Advanced Tech. transferred 270 units to Finished Goods. Summarize the units in the Finishing department Description Physical Units Units to Account for: Beginning WIP-Finishing Add: Transferred in from Assembly Total Units to Account for: Less: Units transferred to Finished Goods Units in Ending Inventory-Finishing The costs in the WIP-Finishing account must be allocated (split) between the 144 partially completed units (as for Finishing) still in ending inventory and the 270 units transferred to the Finished Goods account. A production engineer for Advanced Tech. estimates that the 144 units in ending inventory are 50 % complete for the Finishing phase. Of course, the 270 units transferred are 100 % complete (for Finishing). Calculate the Equivalent Units of Production: Whole Equiv Unit % Description Equivalent Units Units Transferred to Finished Goods % Ending WIP % Total Next, calculate a Cost per Equivalent Unit Description Cost WIP Finishing Costs: Beginning WIP-Finishing Transferred-In Costs from Assembly Materials added to WIP Labor added to WIP MOH added to WIP Subtotal: Divide by Equivalent Units Cost per Equivalent Unit $ Finally, use the Cost per Equivalent Unit above to allocate the total finishing costs and record the necessary entry to credit WIP-Finishing and debit Finished Goods: Equiv. Units Cost per Unit Description X Allocated Transferred Units X $ Ending WIP X $ OTAL 10. Advanced Tech. used cash to pay $115,400 for actual manufacturing overhead costs. 11. Sold 120 units for $192,000 cash. The cost of goods sold was $136,080 ($1,134 x 120 units). 12. Closed the balance in Manufacturing Overhead to Cost of Goods Sold. Cash WIP-Assembly WIP-Finishing Manufacturing Overhead Bal:385,000 (1)78,000 (3)98,000 Bal:23.400 (5)213,837 (2)56,000 Bal:7,391 (5)213,837 Bal: 0 (4)64,400 (3)98,000 (4)64,400 Raw Materials Inventory Finished Goods Sales Cost of Goods Sold Bal:25.000 (2)56,000 Bal:2,800 (1)78,000