Problem 15-2B

Perez Company shows the following costs for three jobs worked on in September.

Additional information

a.Raw Materials Inventory has an August 31 balance of $150,000.

b.Raw materials purchases in September are $400,000, and total factory payroll cost in September is $232,000.

c.Actual overhead costs incurred in September are indirect materials, $30,000; indirect labor, $14,000; factory rent, $20,000; factory utilities, $12,000; and factory equipment depreciation, $30,000.

d.Predetermined overhead rate is 50% of direct labor cost.

e.Job 114 is sold for $380,000 cash in September.

Required

1.Determine the amount of overhead applied to each job in September.

2.Determine the total cost assigned to each job as of September 30 (including the balances from August 31).

3.Prepare journal entries for the month of September to record the following:

a.Materials purchases (on credit).

b.Direct materials used.

c.Direct labor used (and paid in cash) and assigned to Work in Process Inventory.

d.Indirect materials used and assigned to Factory Overhead.

e.Indirect labor used (and paid in cash) and assigned to Factory Overhead.

f.Overhead costs applied to Work in Process Inventory.

g.Actual other overhead costs incurred. (Factory rent and utilities are paid in cash.)

h.Transfer of Jobs 114 and 115 to the Finished Goods Inventory.

i.Cost of Job 114 in the Cost of Goods Sold account.

j.Revenue from the sale of Job 114 received in cash.

k.Close underapplied or overapplied overhead to the Cost of Goods Sold account.

4.Prepare a schedule of cost of goods manufactured.

5.Compute gross profit for September. Show how the three inventory accounts are reported on the September 30 balance sheet.

6.Over- or underapplied overhead is closed to Cost of Goods Sold but not posted to job cost sheets. For this period, is gross profit at the job level understated or overstated?

Check (4) Cost of goods manufactured, $500,000

\begin{tabular}{|c|c|c|c|} \hline & Job 114 & Job 115 & Job 116 \\ \hline \multicolumn{4}{|l|}{ Balances on August 31} \\ \hline Direct materials used (in August) ... & $14,000 & $18,000 & \\ \hline Direct labor used (in August)....... & 18,000 & 16,000 & \\ \hline Overhead applied (August) ........ & 9,000 & 8,000 & \\ \hline \multicolumn{4}{|l|}{ Costs during September } \\ \hline Direct materials used........... & 100,000 & 170,000 & $80,000 \\ \hline Direct labor used . ............. & 30,000 & 68,000 & 120,000 \\ \hline Overhead applied. ............. & ? & ? & ? \\ \hline Status on September 30 & Finished (sold) & Finished (unsold) & In process \\ \hline \end{tabular}