Chapter 19, Problem 3BPSB

To determine

Job cost sheet is defined as a document for recording manufacturing costs related to products and services. Generally it is prepared by companies who computes and allocates costs to products and services using job order costing system.

The information that is shown on job cost sheet usually includes materials requisition number, cost of direct materials issued, time tickets, direct labor hours, direct labor rate per hour, etc.

Requirement-1

To Calculate:

Cost sheet for each job worked from job no 487 to 491.

Answer to Problem 3BPSB

Solution:

Job cost sheets-

Particulars	Job No.487($)	Job no. 488($)	Job no. 489($)	Job no.490($)	Job no. 491($)
Materials	$30,000	20,000	12,000	14,000	4,000
Labor	8,000	7,000	25,000	26,000	2,000
Overhead	16,000	14,000	50,000	52,000	4,000
Total cost	$54,000	$41,000	$87,000	92,000	10,000

Explanation of Solution

Explanation:

Job cost sheet is prepared by adding all direct material, direct labor and overhead costs.

Since material cost and labor cost is specifically given in the question for each individual job from 487 to 491 and overhead cost can be calculated as-

Particulars	Job No.487($)	Job no. 488($)	Job no. 489($)	Job no.490($)	Job no. 491($)
Labor	8,000	7,000	25,000	26,000	2,000
Overhead ( 200%of direct labor)	16,000	14,000	50,000	52,000	4,000

To determine

Requirement-2:

To determine:

In the question, we have to prepare journal entries to record the transaction given in the question

Answer to Problem 3BPSB

Solution:

JOURNAL ENTRIES

Sr. no.	Journal titles	Debit($)	Credit($)
a.	Raw Materials Inventory	125,000
	Accounts Payable		125,000
	(being materials purchased)
b.	Factory Payroll	84,000
	Cash		84,000
	(Being factory payroll recorded)
c.	Factory Overhead	11,000
	Cash		11,000
	(being factory overhead recorded)
d.	Work in Process Inventory	80,000
	Factory Overhead	12,000
	Raw Materials Inventory		92,000
	(Being direct & indirect materials recorded)

e.	Work in Process Inventory	68,000
	Factory Overhead	16,000
	Factory Payroll		84,000
	(being direct & indirect labor recorded)

f.	work in Process Inventory	118,000
	Factory Overhead		118,000
	(being overhead applied to jobs ) [($8,000 + $25,000 + $26,000) x 200%].
g.	Finished Goods Inventory	233,000
	Work in Process Inventory		233,000
	being jobs completed recorded ($54,000 + $87,000 + $92,000).
h.	Accounts Receivable	340,000
	Sales		340,000
	(being sales recorded)
	Cost of Goods Sold($54,000 + $87,000	141,000
	Finished Goods Inventory		141,000
	(being cost of sales recorded).
i.	Factory Overhead	96,000
	Accumulated Depreciation on Factory Building		37,000
	Accumulated Depreciation on Factory Equipment		21,000
	Prepaid Insurance		7,000
	Property Taxes Payable		31,000
	(being other factory overhead recorded)
j.	Goods in Process Inventory[($7,000 + $2,000) x 200%].	18,000
	Factory Overhead		18,000
	(being overhead applied to jobs )

Explanation of Solution

Explanation:

a) When raw material are purchased on credit then raw material account will be debited and accounts payable account will be credited as it is purchased on credit.

b) Factory payroll is recorded and it will be debited as direct material is used in the production and cash will be credited.

c) When factory overhead is recorded then factory overhead account will be debited and cash account will be debited.

d) When direct and indirect material is used in the production then indirect material will be added to the factory overhead and it will be debited and direct material will be debited to work in process account and raw material inventory will be credited as the balance of raw material inventory will decrease.

e) When indirect labor is used in the production then factory overhead account will be debited and factory payroll account will be credited.

f) When overhead is applied to jobs which is 200%of direct labor then work in process account will be debited and factory overhead account will be credited.

g) When finished goods were recorded in the books then finished goods account will be debited as balance of finished goods increases and work in process account will be credited as inventory transfers from work in process to finished goods.

h) When sale is made then accounts receivable will increase thus it will be debited and sale account will be credited with the amount of sale made. In case of cost of goods sold is recorded then cost of goods sold account will be debited and finished goods account will be credited.

i) When depreciation is recorded on equipment and on building then factory overhead will increase and thus debited and accumulated depreciation on equipment and building will be credited and factory overhead account will also increase with the amount of prepaid insurance and property tax.

j) When overhead is applied to the job then goods in process inventory account will be debited with the amount of 200%of direct labor and factory overhead account will be credited.

To determine

Requirement-3

To determine:

We have to prepare ledger accounts and post the journal entry passed in requirement-2 to the ledger accounts.

Answer to Problem 3BPSB

Solution:

General Ledger Accounts.

Raw Materials Inventory						Factory Payroll
(a)	125,000	(d)			92,000	(b)		84,000	(e)	84,000
Bal.	33,000					Bal.		0
Goods in Process Inventory						Factory Overhead
(d)	80,000	(g)		233,000		(c)		11,000	(f)	118,000
(e)	68,000					(d)		12,000	(j)	18,000
(f)	118,000					(e)		16,000
(j)	18,000					(i)		96,000
Bal.	51,000								Bal.	1,000
Finished Goods Inventory						Cost of Goods Sold
(g)	233,000	(h)	141,000			(h)	141,000
Bal.	92,000					Bal.	141,000

Explanation of Solution

Explanation:

The following general accounts have been prepared:

a. Raw Material inventory a/c – Balancing figure is closing balance of inventory

b. Factory payroll

c. Goods in Process Inventory - Balancing figure is closing balance of inventory

d. Factory overhead

e. Finished goods Inventory - Balancing figure is closing balance of inventory

f. Cost of goods sold: will be transferred to P &L account

To determine

Requirement-4

To determine:

We have to prepare a report of total cost of each job in process and for finished goods and cost of goods sold.

Answer to Problem 3BPSB

Solution:

Report of total cost-

Goods in Process Inventory
Job 488	$ 41,000
Job 491	10,000
Balance	$ 51,000
Finished Goods Inventory
Job 490	$ 92,000
Balance	$ 92,000
Cost of Goods Sold
Job 487	$ 54,000
Job 489	87,000
Balance	$141,000

Explanation of Solution

Explanation:

Since the total cost of goods in process inventory of job 488 and 491 is $51000 which is equal to the balance of ledger account of goods in process inventory i.e. $51,000

Similarly, total cost of finished goods inventory of job 490 is $92,000 which is equal to the balance of finished goods account.

Finally, total amount of cost of goods sold of job 487 and 489 is $141,000 which is same as balance of cost of goods sold account.