Question

Kenworth Company uses a job-order costing system. Only three jobs—Job 105, Job 106, and Job 107—were worked on during November and December. Job 105 was completed on December 10; the other two jobs were still in production on December 31, the end of the company’s operating year. Data from the job cost sheets of the three jobs follow:

	Job Cost Sheet
	Job 105			Job 106			Job 107
November costs incurred:
Direct materials	$	19,500		$	12,300		$	0
Direct labour	$	16,000		$	10,000		$	0
Manufacturing overhead	$	24,000		$	15,000		$	0
December costs incurred:
Direct materials	$	0		$	9,700		$	27,300
Direct labour	$	6,250		$	7,500		$	13,000
Manufacturing overhead		?			?			?

The following additional information is available:

a.	Manufacturing overhead is applied to jobs on the basis of direct labour cost.
b.	Balances in the inventory accounts at November 30 were as follows:

  

Raw Materials	$	49,000
Work in Process		?
Finished Goods	$	100,000

   

Required:

1.	Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, and Manufacturing Overhead. Enter the November 30 inventory balances given above; in the case of Work in Process, compute the November 30 balance and enter it into the Work in Process T-account.

  

  

2.	Prepare journal entries for December as follows:

a.

Prepare an entry to record the issue of materials into production and post the entry to appropriate T-accounts. (In the case of direct materials, it is not necessary to make a separate entry for each job.) Indirect materials used during December totalled $6,250. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

  

      

   

b.

Prepare an entry to record the incurrence of labour cost, and post the entry to appropriate T-accounts. (In the case of direct labour cost, it is not necessary to make a separate entry for each job.) Indirect labour cost totalled $11,000 for December. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

  

         

   

c.

Prepare an entry to record the incurrence of $20,375 in various actual manufacturing overhead costs for December (credit Accounts Payable). Post this entry to the appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

  

        

    

3-a.	What apparent predetermined overhead rate does the company use to assign overhead cost to jobs?

           

  

3-b.

Prepare a journal entry to record the application of overhead cost to jobs for December (it is not necessary to make a separate entry for each job). Post this entry to the appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

  

         

4.

As stated earlier, Job 105 was completed during December. Prepare a journal entry to show the transfer of this job off the production line and into the finished goods warehouse. Post the entry to the appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

  

     

        

5.	Determine the balance at December 31 in the Work in Process inventory account. How much of this balance consists of costs charged to Job 106? Job 107?

       

Answer 1

	overhead rate = 24000/16000=			150%
				Job cost sheet
					Job 105	Job 106	Job 107	total
	November costs incurred:
	Direct materials				19,500	12,300	0	31,800
	Direct labor				16,000	10,000	0	26,000
	Manufacturing overhead				24,000	15,000	0	39,000
	Total Beginning WIP				59,500	37,300	0	96,800
	December costs incurred:
	Direct materials				0	9,700	27,300	37,000
	Direct labor				6,250	7,500	13,000	26,750
	Manufacturing overhead				9375	11250	19500	40,125
	cost added during december				15,625	28,450	59,800	103,875
	total cost of job				75,125	65,750	59,800	200,675
1)	T-Accounts
	Raw materials					Work in progress
	Beg.bal	49,000				Beg bal	96,800
			37,000	a)		a)	37,000	75,125	e)
			6,250	a)		b)	26,750
	End bal					d)	40,125
						End bal	125,550
	Finished goods					Manufacturing overhead
	Beg.Bal	100,000				Beg.Bal	0
	e)	75,125				a)	6,250	40,125	d)
						b)	11,000
	End bal					c)	20,375
						End bal		2,500
	Salaries & wages payable					Accounts payable
	Beg bal					Beg bal
			37,750	b)				20,375	c)
	End bal					end bal

2)	Event	General Journl				Debit	Credit
a)	1)	Work in process				37,000
		Manufacturing overhead				6,250
		Raw Materials					43,250
b)	2)	Work in process				26,750
		Manufacturing overhead				11,000
		Salaries & wages payable					37,750
c)	3)	Manufacturing overhead				20,375
		Accounts payable					20,375
3a)	predetermined overhead rate			150%
3b)		Work in process				40,125
		Manufacturing ovehead					40,125
4)		Finished goods				75,125
		Work in process inventory					75,125
5)				Job 106	job 107	total
	Direct materials			22,000	27,300	49,300
	direct labor			17,500	13,000	30,500
	manufacturing overhead			26,250	19500	45,750
	Total cost			65,750	59,800	125,550