Question

Problem 1

Rawr is a manufacturer of dehydrated cat treats located in Oakland, CA.  The company has two production processes: Dehydrating and Packaging.  October 1 inventory balances are as follows: Raw Materials $800; Work in Process -Dehydrating $200; Work in Process -Packaging $300; and Finished Goods $500.  The company incurs $5,000 of factory labor costs and incurs overhead costs of $1,800 during the month.  The Dehydrating department requisitioned $400 of materials and the Packaging department requisition $100 of materials in the month.  Time tickets indicate that the Dehydrating department used 60% of the total labor costs.  Manufacturing overhead is assigned to departments on the basis of 40% of labor costs.  

Requirement 1:  Prepare the journal entry to assign the material costs for both departments.

Date                Accounts & Explanations                                                       Debit                              Credit

Oct. 31

Requirement 2:  Prepare the journal entry to assign the factory labor costs for both departments.

Date                Accounts & Explanations                                                       Debit                              Credit

Oct. 31

Requirement 3:  Prepare the journal entry to assign the overhead costs for both departments.

Date                Accounts & Explanations                                                       Debit                              Credit

Oct. 31

Requirement 4:  Is the company’s overhead over or under applied for the period?  Explain.

Answer 1

Date	Account title	Debit	credit
Oct 31	Work in Process -Dehydrating	400
	Work in Process -Packaging	100
	Raw material inventory		500
Oct 31	Work in Process -Dehydrating {5000*60%}	3000
	Work in Process -Packaging	2000
	Factory labor		5000
Oct 31	Work in Process -Dehydrating {3000*40%}	1200
	Work in Process -Packaging {2000*40%}	800
	Manufacturing overhead		2000

4)

Actua overhead	1800
Applied overhead	2000
Underapplied /(overapplied ) overhead	(200) overapplied