Problem 1 - Quality Painters Quality Painters, Inc., uses a job cost system As of January 1, its records showed the following inventory balances: Materials $12,000 Work in process $50,000 (consisting of Job 100 $30,000 and Job 101 $20,000) Finished goods SQ_(no jobs were finished and unsold as of Jan 1) 3 4 5 6 27 Here are data for the company in January a Materials purchased, $85,000. b. Direct materials used: direct materials for Job No. 100, $15,500; for Job No. 101, $28,500, and for Job No. 102 (a new job). $48.000 c. Supplies (indirect materials) used amounted to $5,500. d. Direct labor costs: direct labor to Job No. 100, $22,500, to Job No. 101, $40,000, and to Job No. 102, $50,000 e. Indirect labor, $22,500. f. Overhead is assigned to jobs at $8 per labor-hour, with 500 labor-hours to Job 100 and 2,500 labor-hours each to Jobs 101 and 102 Tahe 100 sd 102 ara comnlatadin Tom Tab 101 annot finshad) Sheet1 18 19 20 21 22 Type here to search o 31 A H 23 24 1 26 27 C. g Jobs 100 and 102 were completed in January (Job 101 was not finished) h Sales revenues for January were $250,000 for Job 100 (Job 102 has not been sold) Actual overhead costs incurred other than indirect labor and indirect materials were depreciation, $8,000 and utilities, fuel, and miscellaneous, $15,500 which is scheduled to be paid next month 1 Was overhead under- or over-applied? Make a journal entry to correct any difference, if needed Required: 1. Prepare a job cost sheet for each job. 2. Prepare journal entries for the January activity (labeled a to jabove) assuming all purchases and sales were on credit 3. Prepare an income statement for January assuming selling and administrative expenses for January were $65,000 4. Is the company profitable (that is showing net income greater than zero)? What suggestions can you make for management to help increase the company's net income? 28 29 30 31 32 33 34 35 101 102 Self Check: 36 1. Calculate the Job Cost for each job: 37 100 38 Beg. Work in Process Inventory 39 Direct Materials 40 Direct Labor 41 Applied Overhead 42 ($10 per labor hour x labor hours 43 Total Actual Job Cost S Self Check on Job Costs: Total $ S $ $ show calculations in this tow $ 46 2. Prepare Journal Entries Debit Credit 47 D E F H B 16 2. Prepare Journal Entries 7 Debit Credit 18 Purchased materials on account (a) 19 50 51 52 Assign direct material costs to jobs (b) 53 54 55 56 Assign indirect material (supplies) cost used (c) 57 58 59 60 Assign direct labor costs to jobs (d) 61 62 63 64 Assign indirect labor cost used (e) 65 66 67 68 Apply overhead costs to jobs (f) 69 70 71 72 Transfer costs of all jobs to Finished Goods Inventory (9) 73 Sheet1 Problem 1 - Quality Painters Quality Painters, Inc., uses a job cost system As of January 1, its records showed the following inventory balances: Materials $12,000 Work in process $50,000 (consisting of Job 100 $30,000 and Job 101 $20,000) Finished goods SQ_(no jobs were finished and unsold as of Jan 1) 3 4 5 6 27 Here are data for the company in January a Materials purchased, $85,000. b. Direct materials used: direct materials for Job No. 100, $15,500; for Job No. 101, $28,500, and for Job No. 102 (a new job). $48.000 c. Supplies (indirect materials) used amounted to $5,500. d. Direct labor costs: direct labor to Job No. 100, $22,500, to Job No. 101, $40,000, and to Job No. 102, $50,000 e. Indirect labor, $22,500. f. Overhead is assigned to jobs at $8 per labor-hour, with 500 labor-hours to Job 100 and 2,500 labor-hours each to Jobs 101 and 102 Tahe 100 sd 102 ara comnlatadin Tom Tab 101 annot finshad) Sheet1 18 19 20 21 22 Type here to search o 31 B D E F G H 104 4. Analysis (Use complete sentences and refer to your data): 105 106 107 108 Problem 2 Note: Do not show the difference as a negative number! 109 Problem 2 Sullivan Company applied overhead to production using a predetermined overhead rate 110 based on machine-hours. Budgeted data is: 111 112 Budgeted machine-hours 85,000 113 Budgeted manufacturing overhead $920,000 114 115 Required: 116 117 a Compute the predetermined overhead rate (round to the nearest cent, if necessary). 118 b. 119 Assume actual manufacturing overhead amounted to $930,000, and 86,000 machine-hours were used Compute the amount of underapplied or overapplied manufacturing overhead and prepare the journal entry to transfer underapplied or overapplied overhead to Cost of Goods Sold. 120 121 122 Hint? 123 124 a) POHR = 125 126 127 b) Applied OH = Sheet1 Type here to search E H D 127 b) Applied OH = 18 Self Check 129 Applied OH Hint? 130 Actual OH Hint? 131 Difference Hint? 132 Over or under applied? Hint? 133 Over-or Under-applied overhead is not a self check item 134 c) Adjusting entry: 135 Debit Credit 136 137 138 139 140 Critical Thinking Question 141 142 Pick one of the questions below and provide a brief response 143 1 What are the major reasons for using predetermined manufacturing overhead rates? 144 145 2. What is underapplied and overapplied overhead? What type of balance does each have in the 146 Overhead account? 147 3 Assume Domino's Pizza is considering offering a new product a 6-inch pizza Why would it 148 matter if Domino's Pizza knows how much it costs to produce and deliver this 6-inch pizza? 149 150 Question chosen to answer: (Enter the question number you are annivering in the spoce to the left) 151 Enter answer below: Sheet1 Type here to search