Ref. Account Debit Credit a) Raw Material purchased on account a Raw Material Inventory 171,000 Cash 171,000 b) Raw Material used as direct and indirect material b Work in Process Inventory 144,000 Factory Overhead 9,000 Raw Material Inventory 153,000 c) Recognition of direct and indirect labor owed to employees C Work-in Process Inventory 154,000 Factory Overhead 46,000 Factory Wages Payable 200,000 d) Application of factory overhead to work-in-process d Work in Process Inventory 84,700 Factory Overhead 84,700 e) Recognition of Cost of Goods Manufactured e Finished Goods Inventory 373,400 Work-in Process Inventory 373,400 f) Recognition of Sales Revenue f Cash 1,600,000 Sales Revenue 1,600,000 g) Recognition of Cost of Goods Sold Cost of Goods Sold 390,000 Finished Goods Inventory 390,000 h) Incurrence of other overhead costs (use "various" to represent multiple accounts. h Factory Overhead 114,000 Accounts Payable 114,000Lock-Tite Company Jobs Report - Traditional OH allocation (DL dollars) Year Ending December 31 JV28 BY92 ZF 14 Sales Revenue From be) Job Costs: Direct Material Start here in 6a) Direct Labor From 6b) Overhead From 6c) Total Job Costs/COGS DM+DL+OH Gross Margin Sales - COGS Gross Margin % GM/Sales a) Direct Material: Job JV28 used 8% of the company's Direct Material (amount from JE 1b), Job BY92 used 6% and Job ZF 14 used 4% the company's Direct Material. Use these percentages and calculate the Direct Material for each job. The combined total for the three jobs WILL NOT agree to the total costs because Lock-Tite has other jobs they sold as well as jobs that are still in inventory. Include these amounts in the Jobs Report above. Job JV28 Job BY92 Job ZF14 Total DM From JE 1b (Direct only) % used by job 8% 6% a Given above DM per job Calculate (multiply) b) Direct Labor: 8% of the company's actual Direct Labor costs were spent on Job JV28. Job BY92 and ZF14 cach used 3% and 2%, respectively. Use these percentages and calculate the Direct Material for each job. Include these amounts in the table above. Job JV28 Job BY92 Job ZF 14 Total DL From JE lc (Direct only) % used by job 4% 3% 2% Given above DL per job Calculate (multiply c) Factory Overhead; Use the 55% of direct labor dollars and calculate the overhead as it would be applied using a plantwide predetermined rate. Include the amounts in the Jobs Report above for Overhead Cost. Job JV28 Job BY92 Job ZF14 DL per job Calculated in 6b bottom Predetermined rate 0.55 0.55 0.55 given in connect FOH per job Calculate (multiply) d) Determine the total job costs by adding DM, DL and OH for each job in the Jobs Report above. (Add DM, DL and OH together).5. B Estimated % of Driver Calculated Total Allocated costs units Driver Activity Rate Design 14% $16,601 22 # of Jobs $754.59 Batch setup 10% $11,858 50 # of set ups $237.16 Material 62% $73,520 240 # of materials $306.33 Handling Inspection 5% $5,929 1,200 # of units $4.94 General Factory 9% $10,672 14,000 machine hours $0.76 Total Budgeted OH 100% $118,580 Start here with 4a amount c) During May, the company tracked the necessary drivers for each cost pool. These driver units are listed in the table below. Multiply these units by the appropriate "activity rate" from the table above in 5b. Add the total together. This represents applied overhead for Lock-Tite had used ABC costing. Round to the nearest whole dollar. Actual Driver units Driver Applied Factory Overhead Design 30 # of Jobs Batch setup 70 # of set ups Material Handling 330 # of materials Inspection 1,600 # of units General Factory 13,800 machine hours Total Applied Overhead d) Using ABC, would overhead be over- or under-applied? By how much? c) Overhead is becoming a bigger and bigger cost component of Lock-Tite's products. The vice president has indicated the company has had a difficult time applying overhead because of the complexity of their products. Products tend to have a higher number of components that require more costly material handling and designing. Which method do you think would be best for Lock-Tite to use to apply overhead? Traditional plant-wide overhead rate using direct labor dollars, hours, machine hours, or ABC method? Support your answer by incorporating observations from the calculations in 5) and 6). Answer with complete sentences using between 30 and 50 words. 6) To better understand the impact of the applying overhead for their job costing facility, Lock-Tite wants to analyze a few of its larger jobs using both their traditional (percent of direct labor dollars) versus the ABC method. Lock-Tite's three largest jobs during the year were, JV28, BY92 and ZF 14. Use the calculations in a) through g) below to complete the Jobs Report here. Use whole dollar amounts except for Gross Margin %