Concept explainers
Gerken Fabrication Inc. uses the job order cost system of accounting. The following information was taken from the company’s books after all posting had been completed at the end of March:
- a. Compute the total production cost of each job.
- b. Prepare the journal entries to charge the costs of materials, labor, and factory
overhead to Work in Process. - c. Prepare the
journal entry to transfer thecost of jobs completed to Finished Goods. - d. Compute the unit cost of each job.
- e. Compute the selling price per unit for each job, assuming a mark-on percentage of 50%.
a.
Calculate the total production cost for each job.
Explanation of Solution
Production costs are those costs that are incurred for manufacturing a product or providing the service to the end user.
Calculate the total production cost for each job.
Jobs Completed | Direct Materials Cost ($) | Direct Labor Cost ($) | Factory Overhead ($) | Total Production Cost ($) |
1100 | 4,200 | 5,000 | 9,000 | 18,200 |
1200 | 3,700 | 4,500 | 7,800 | 16,000 |
1300 | 2,900 | 4,100 | 6,300 | 13,300 |
Total | 10,800 | 13,600 | 23,100 | 47,500 |
Table (1)
Thus, the total value of production cost is $47,500.
b.
Provide journal entry to charge the cost of materials, labor, and factory overhead to work-in process.
Explanation of Solution
Prepare journal entry to charge the cost of materials, labor, and factory overhead to work-in process.
Date | Accounts title and explanation | Debit ($) | Credit ($) |
Work in Process (Job 1100,1200, 1300) | 10,800 | ||
Materials | 10,800 | ||
(To record materials issued to Job 1100,1200, 1300) | |||
Work in Process (Job 1100,1200, 1300) | 13,600 | ||
Payroll | 13,600 | ||
(To record payment of wages to the labor involved in Job 1100,1200, 1300) | |||
Work in Process (Job 1100,1200, 1300) | 23,100 | ||
Factory Overhead | 23,100 | ||
(To record transfer of factory overhead to Work-in process in Job 1100,1200, 1300) |
Table (2)
c.
Provide journal entry for transfer the cost of job completed to finished goods.
Explanation of Solution
Prepare journal entry for transfer the cost of job completed to finished goods.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Finished Goods | 47,500 | ||
Work in Process (Job 1100,1200, 1300) | 47,500 | ||
(To record transfer of cost of job completed to finished goods) |
Table (3)
d.
Calculate the unit cost of each job.
Explanation of Solution
Calculate the unit cost of each job.
Hence, the unit cost of Job 1100, Job 1200, and Job 1300 is $36.40, $40.00, and $44.33 respectively.
e.
Calculate the selling price per unit for each job, assuming that a mark-on percentage is 60%.
Explanation of Solution
Calculate the selling price per unit for Job 1100.
Calculate the selling price per unit for Job 1200.
Calculate the selling price per unit for Job 1300.
Hence, the selling price per unit for Job 1100, Job 1200, and Job 1300 is $54.60, $60.00, and $66.50 respectively.
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Chapter 1 Solutions
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