Chapter 19, Problem 1PSA

Problem 19-1A
Production costs computed and recorded; reports prepared C2 P1 P2 P3 P4
Marcelino Co's March 31 inventory of raw materials is $80,000. Raw materials purchases in April are $500,000, and factory payroll cost in April is $363,000, Overhead costs incurred in April are: indirect materials, $50,000; indirect labor, $23,000; factory rent, $32,000; factory utilities, $19,000; and factor)' equipment depreciation, $51,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $635,000 cash in April. Costs of the three jobs worked on in April Mow.

	Jsb 306	Job 307	Job 308
Balances on March 31
Direct materials	$ 29.000	$ 35.000
Direct lata	20.000	18.000
Applied overhead	10,10	9.000
Costs during April
Direct materials	135,000	220.000	$100,000
Direct lata	85,000	150.000	105,000
Applied overhead	?	?	?
Status or April 30	Finished (sold)	Finished (unsold)	In process

Required

1. Determine the total of each production cost incurred for April (direct labor, direct materials, and applied overhead) and the total cost assigned to each job (including the balances from March 31).
2. Prepare journal entries for the month of April to record the following.

a. Materials purchases (on credit).
b. Direct materials used in production.
c. Direct labor paid and assigned to Work in Process Inventor)7.
d. Indirect labor paid and assigned to Factor;7 Overhead.
e. Overhead costs applied to Work in Process Inventor)7.
f. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
g.
Transfer of Jobs 306 and 307 to Finished Goods Inventory.
h.
Cost of goods sold for Job 306.
i. Revenue from the sale of Job 306.
j. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

Prepare a schedule of cost of goods manufactured.

Compute gross profit for April. Show how to present the inventories on the April 30 balance sheet.

The over- or underapplied overhead is closed to Cost of Goods Sold. Discuss how this adjustment impacts business decision making regarding individual jobs or batches of jobs.