
1.
Ascertain the total of each production cost incurred for April and total cost assigned to each job.
1.

Explanation of Solution
Job order costing is one of the methods of cost accounting under which cost is collected and gathered for each job, work order, or project separately. It is a system by which a factory maintains a separate record of each particular quantity of product that passes through the factory. Job order costing is used when the products produced are significantly different from each other.
Ascertain the total of each production cost incurred for April and total cost assigned to each job.
Particulars | 306 | 307 | 308 | April Total |
From the month of March | ||||
Direct materials | 29,000 | 35,000 | ||
Direct labor | 20,000 | 18,000 | ||
Applied | 10,000 | 9,000 | ||
Beginning work in process | 59,000 | 62,000 | 121,000 | |
For the month of April | ||||
Direct materials | 135,000 | 220,000 | 100,000 | 455,000 |
Direct labor | 85,000 | 150,000 | 105,000 | 340,000 |
Applied overhead | 42,500 | 75,000 | 52,500 | 170,000 |
Total costs added in April | 262,500 | 445,000 | 257,500 | 965,000 |
Total costs | 321,500 | 507,000 | 257,500 | 1,086,000 |
(Table 1)
Note:
Applied overhead for the month of March and April equals the 50% of the direct labor cost.
2.
Prepare
2.

Explanation of Solution
Prepare journal entry to record the transactions for the month of April.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
a. | Raw Material inventory | 500,000 | |
Accounts payable | 500,000 | ||
(To record the purchase of materials on account.) | |||
b. | Work in process inventory | 455,000 | |
Raw Materials inventory | 455,000 | ||
(To assign cost of direct materials used) | |||
c. | Work in process inventory | 340,000 | |
Cash | 340,000 | ||
(To record the direct labor) | |||
d. | Factory overhead | 23,000 | |
Cash | 23,000 | ||
(To record indirect labor.) | |||
e. | Work in process inventory | 170,000 | |
Factory Overhead | 170,000 | ||
(To apply overhead to jobs.) | |||
f. | Factory overhead | 50,000 | |
Raw materials inventory | 50,000 | ||
(To record indirect materials ) | |||
Factory overhead | 19,000 | ||
Cash | 19,000 | ||
(To record the factory utilities) | |||
Factory overhead | 51,000 | ||
Equipment | 51,000 | ||
(To record other factory overhead) | |||
Factory overhead | 32,000 | ||
Cash | 32,000 | ||
(To record the factory rent) | |||
g. | Finished goods inventory ( job 306 &307) | 828,500 | |
Work in process inventory | 828,500 | ||
(To record jobs completed ($321,500+$507,000) | |||
h. | Cost of goods sold (306) | 321,500 | |
Finished goods inventory | 321,500 | ||
(To record the cost of sale job) | |||
i. | Cash | 635,000 | |
Sales | 635,000 | ||
(To record the sale of job) | |||
j. | Cost of goods sold | 5,000 | |
Factory overhead (1) | 5,000 | ||
(To assign underapplied overhead) |
(Table 2)
Working Note:
Calculate the amount factory overhead:
Particulars | Amount in $ | Amount in $ |
Overhead applied to jobs | 170,000 | |
Overhead incurred: | ||
Indirect materials | 50,000 | |
Indirect labor | 23,000 | |
Factory rent | 32,000 | |
Factory utilities | 19,000 | |
Factory Equipment Depreciation | 51,000 | 175,000 |
Underapplied overhead | 5,000 |
(Table 3)
…… (1)
3.
Prepare a schedule of cost of goods manufactured.
3.

Explanation of Solution
Company M | |
Schedule of costs of goods manufactured | |
For month ended April 30 | |
Particulars | Amount in $ |
Direct materials used | 455,000 |
Direct labor used | 340,000 |
Factory overhead applied | 170,000 |
Total | 965,000 |
Add work in process March 31 (Jobs 306 & 307) | 121,000 |
Total cost of work in process | 1,086,000 |
Deduct work in process, April 30 (Job 308) | (257,500) |
Cost of goods manufactured | 828,500 |
(Table 4)
4.
Compute gross profit for April and also show the manner by which the inventories on April 30
4.

Explanation of Solution
Compute gross profit for April.
Particulars | Amount in $ |
Sales | 635,000 |
Cost of goods sold | (326,500) |
Gross profit | 308,500 |
(Table 5)
Show the manner by which the inventories on April 30 balance sheet is presented.
Particulars | Amount in $ |
Inventories | |
Raw materials (2) | 75,000 |
Work in process (Job 308) | 257,500 |
Finished goods (Job 307) | 507,000 |
Total Inventories | 839,500 |
(Table 6)
Working notes:
Calculate the amount of raw materials:
Particulars | Amount in $ |
Beginning raw materials inventory | 80,000 |
Purchase | 500,000 |
Direct materials used | (455,000) |
Indirect raw materials used | (50,000) |
Ending raw materials inventory | 75,000 |
(Table 6)
…… (2)
5.
Discuss the manner by which the adjustment the over- or underapplied overhead is closed to Cost of Goods Sold will have an impact on business decision making regarding to individual jobs or batches of job.
5.

Explanation of Solution
The overhead for the business is being overstated by $5,000. This will have an impact on the profits earned by the company at job level by overstating the job.
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Chapter 19 Solutions
Principles of Financial Accounting, Chapters 1-17 - With Access (Looseleaf)
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