Question
Watkins Machinery Company uses a normal job costing system. The company has the following partial trial balance information for March, the last month of its
Watkins Machinery Company uses a normal job costing system. The company has the following partial trial balance information for March, the last month of its fiscal year:
Materials inventory (X, $7,500; Y, $5,000; Indirect materials, $12,500) | $ | 25,000 | |
Work-in-process inventory (this is Job 101) | 13,200 | ||
Finished goods inventory (this is Job 100) | 22,000 | ||
These transactions relate to the month of March:
- Purchased direct materials and indirect materials with the following summary of receiving reports:
Material X | $ | 25,000 | |
Material Y | 25,000 | ||
Indirect materials | 12,500 | ||
Total | $ | 62,500 | |
- Issued direct materials and indirect materials with this summary of requisitions:
Job 101 | Job 102 | Total | |||||||||
Material X | $ | 12,500 | $ | 7,500 | $ | 20,000 | |||||
Material Y | 10,000 | 3,000 | 13,000 | ||||||||
Subtotal | $ | 22,500 | $ | 10,500 | $ | 33,000 | |||||
Indirect materials | 20,000 | ||||||||||
Total | $ | 53,000 | |||||||||
- Factory labor incurred is summarized by these time tickets:
Job 101 | $ | 26,400 | |
Job 102 | 17,600 | ||
Indirect labor | 12,500 | ||
Total | $ | 56,500 | |
- Factory utilities, factory depreciation, and factory insurance incurred is summarized as follows:
Utilities | $ | 1,250 | |
Depreciation | 37,500 | ||
Insurance | 6,250 | ||
Total | $ | 45,000 | |
- Factory overhead costs were applied to jobs at the predetermined rate of $15 per machine hour. Job 101 incurred 3,000 machine hours; Job 102 used 2,000 machine hours.
- Job 101 was completed; Job 102 was still in process at the end of March.
- Job 100 and Job 101 were shipped to customers during March. Both jobs had gross margins of 20% based on manufacturing cost.
- The company closed the overapplied or underapplied overhead to the Cost of Goods Sold account at the end of March.
Required:
1. Prepare journal entries to record the transactions for the events from parts (a) through (g).
2. Compute the ending balance of the Work-in-process inventory account.
3. Compute the overhead variance and indicate whether it is overapplied or underapplied.
4. Close the overhead variance to the Cost of goods sold account.
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