Problem 1: (LO 1, 2, 3, 4, 5), AP Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2020, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials 20,000, direct labor 12,000, and manufacturing overhead 16,000. As of January 1, Job 49 had been completed at a cost of 90,000 and was part of finished goods inventory. There was a 15,000 balance in the Raw Materials Inventory account. During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for 122,000 and 158,000, respectively. The following additional events occurred during the month.

1. Purchased additional raw materials of 90,000 on account.

2. Incurred factory labor costs of 70,000. Of this amount 16,000 related to employer payroll taxes.

3. Incurred manufacturing overhead costs as follows: indirect materials 17,000, indirect labor 20,000, depreciation expense on equipment 12,000, and various other manufacturing overhead costs on account 16,000.

4. Assigned direct materials and direct labor to jobs as follows.

Job No. Direct Materials Direct Labor

50 10,000 5,000

51 39,000 25,000

52 30,000 20,000

Instructions

a. Calculate the predetermined overhead rate for 2020, assuming Lott Company estimates total manufacturing overhead costs of 840,000, direct labor costs of 700,000, and direct labor hours of 20,000 for the year.

b. Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet for Job 50.

c. Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January.

d. Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in. Post all costs to the job cost sheets as necessary.

e. Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry (or entries) to record the completion of any job(s) during the month. Job 50, 69,000 Job 51, 94,000.

f. Prepare the journal entry (or entries) to record the sale of any job(s) during the month.

g. What is the balance in the Finished Goods Inventory account at the end of the month? What does this balance consist of?

h. What is the amount of over or under-applied overhead?