Samson Company Case Sampson Company uses a job order cost system with overhead applied to products based on direct labor hours. Based on previous history, the company estimated its total overhead for the coming year (2014) to be $720,000 and its total direct labor hours to be 24,000. On January 1, 2014, the general ledger of Sampson Company revealed that it had one job in process (Job 102) for which it had incurred a total cost of $15,000. Job 101 had been finished the previous month for a total cost of $30,000 but was not yet sold. The company had a contract for Job 103 but had not started working on it yet. Other balances in Raw Materials Inventory and other assets, liabilities, and stockholders' equity accounts are summarized on the next page. SAMPSON COMPANY General Ledger Accounts Raw Materials Inventory 10.000 Manufacturing Overhead 1/1 Balance Work in Process Inventory (WIP) Finished Goods Inventory 1/1 Balance 15.000 in Balance Cost of Good Sold Individutal Job Cost Sheets (suhsidiary ledgers to WIP) Job 102 Job 103 Beg Balance 15.000 + Direct Materials + Direct Labor + Applied OH Total Mig Cat Sales Revenue Selling. Geseral and Administrative Expenses Cash and Other Aucts 100.000 Payables and Other Libilities 85.000 1/1 Balance 1/1 Balance Stockholders' Equity 70.000 / Balance During January, the company had the following transactions (a) Purchased $10,000 worth of raw materials on account (b) Issued the following materials into production: Item Direct materials Indirect materials Total materials issued Cost $7,000 2,000 59000 Explanation Job 102, 52,000, Job 100 55.000 Used on both jobs (c) Recorded salaries and wages payahle as follows: Item Direct labor Indirect labor Salaries Total payroll cost Cout $10.000 4,000 5000 $19.000 Explanation Job 102, 56,000 Job 103, 54,000 For factory supervision For administrative staff (d) Applied overhead to jobs based on the number of direct labor hours required Job Number Direct Labor Hours Job 102 300 hours Job 103 200 hours Total 500 hours (e) Recorded the following actual manufacturing cost Item Ront Depreciation Insurance Utilities Total cost Cost $ 6,000 5,000 3.000 2000 516,000 Explanation Paid factory rent in cash Factory equipment Had one month of factory insurance policy expire Received factory utility bill but did not payir Recorded the following general and administrative coste Item Advertising Depreciation Other expenses Total cost Cost $2.000 3,000 1,000 $6,000 Explanation Advertising paid in cash Ofice equipment Micellaneous expenses incurred but not paid () Sold Job 101, which is recorded in Finished Goods Inventory at a cost of $30.000, for $55,000 (h) Completed Job 102 but did not sell it: Job 103 is still in process at year-end 4. Prepare journal entries to record the January transactions and post the entries to the general ledger T-accounts given earlier in the problem. 5. Calculate the amount of over- or underapplied overhead. 6. Prepare the journal entry to dispose of the overhead balance assuming that it had been a year- end balance instead of a month-end balance. Post the effect to the general ledger T-accounts. 7. Prepare a statement of cost of goods manufactured report including the adjustment for over- or underapplied overhead. 8. Prepare a brief income statement for Sampson Company
