Modern Building Solutions (MBS) builds portable buildings to clients’ specifications. The firm has two departments: Parts Fabrication and Assembly. The Parts Fabrication Department designs and cuts the major components of the building and is highly automated. The Assembly Department assembles and installs the components and this department is highly labor intensive. The Assembly Department begins work on the buildings as soon as the floor components are available from the Parts Fabrication Department. In its first month of operati
Modern Building Solutions (MBS) builds portable buildings to clients’ specifications. The firm has two departments: Parts Fabrication and Assembly. The Parts Fabrication Department designs and cuts the major components of the building and is highly automated. The Assembly Department assembles and installs the components and this department is highly labor intensive. The Assembly Department begins work on the buildings as soon as the floor components are available from the Parts Fabrication Department.
In its first month of operations (March 2013), MBS obtained contracts for three buildings:
- Job 1: a 20-by 40-foot storage building
- Job 2: a 35-foot commercial utility building
- Job 3: a 30-by 40-foot portable classroom
MBS bills its customers on a cost-plus basis, with profit set equal to 25 percent of costs. The firm uses a
- Direct material was purchased on account: P80,000
- Direct material was issued to the Parts Fabrication Department for use in the three jobs: Job #1, P8,000; Job #2, P14,000; and Job #3, P45,000. Direct material was issued to the Assembly Department: Job #1, P500; Job #2, P1,200; and Job #3, P6,600.
- Time sheets and payroll summaries indicated that the following direct labor costs were incurred:
|
|
Parts Fabrication Department |
Assembly Department |
|
Job #1 |
P1,000 |
P2,400 |
|
Job #2 |
3,000 |
3,500 |
|
Job #3 |
5,000 |
9,500 |
- The following indirect costs were incurred in each department:
|
|
Parts Fabrication Department |
Assembly Department |
|
Job #1 |
P4,200 |
P4,500 |
|
Job #2 |
5,900 |
2,300 |
|
Job #3 |
10,300 |
3,600 |
The labor and utilities/fue costs were accrued at the time of the
- The overhead was applied based on the predetermined rates in effect in each department. The Parts Fabrication Department had 200 MHs (20 MHs on Job #1, 35 MHs on Job #2, and 145 MHs on Job #3), and the Assembly Department worked 950 DLHs (40 DLHs on Job #1, 110 DLHs on Job #2, and 800 DLHs on Job #3) for the month.
- Job #1 was completed and sold for cash in the amount of the cost-plus contract. At the month-end, Jobs #2 and #3 were only partially complete.
- Any underapplied or overapplied overhead at month-end is considered immaterial and is assigned to Cost of Goods Sold.
Required:
- Record the journal entries for each of the aforementioned transactions.
- As of the end of March 2013, determine the total cost assigned to Jobs #2 and #3.
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