Chapter 2, Problem 3PSA

Widmer Watercraft’s predetermined overhead rate for 2015 is 200% of direct labor. Information on the company’s production activities during May 2015 follows.

1. Purchased raw materials on credit,
2. Materials requisitions record use of the following materials for the month.

1. Paid $15,000 cash to a computer consultant to reprogram factory
2. Lime tickets record of the following labor for the month. These were paid in cash.

1. Applied overhead to Jobs 136, 138, and 139.
2. Transferred Jobs 136, 138, and 139 to Finished Goods.
3. Sold Jobs 136 and 138 on credit at a total price of $525,000.
4. The company incurred the following overhead cost during the month (credit Prepaid Insurance for expired factory insurance).

1. Applied overhead at month-end to the Work in Inventory account (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.

Required

1. Prepare a job cost sheet for each job worked on during the month. Use the following simplified form.

2. Prepare journal entries to record the events and transactions a through i.
3. Set up T-accounts for each of the following general ledger accounts, each of which started the month with a zero balance: Raw Materials Inventory; Work in Process Inventory; Finished Goods Inventory; Factory Overhead; Cost of Goods Sold. Then post the journal entries to these T-accounts and determine the balance of each account.
4. Prepare a report showing the total cost of each job in process and prove that the sum of their costs equals the Work in Process Inventory account balance. Prepare similar reports for Finished Goods Inventory and Cost of Goods Sold.