4-25 Job costing, accounting for manufacturing overhead, budgeted rates.
SOLUTION
1. An overview of the product costing system is
INDIRECT
COST
POOL
Machining Department
Manufacturing Overhead
Assembly Department
Manufacturing Overhead
COST
ALLOCATION
BASE
Machine-Hours Direct Manuf.
Labor Cost
COST OBJECT:
PRODUCT
Indirect Costs
Direct Costs
DIRECT
COST Direct
Materials
Direct
Manufacturing
Labor
Budgeted manufacturing overhead divided by allocation base:
$1,800,000
Machining Department overhead: = $36 per machine-hour
50,000
$3,600,000
Assembly Department overhead: = 180% of direct manuf. labor costs
$2,000,000
2. Machining department overhead allocated, 2,000 hours $36 $72,000
Assembly department overhead allocated, 180% $15,000 27,000
Total manufacturing overhead allocated to Job 494 $99,000
3. Machining Dept. Assembly Dept.
Actual manufacturing overhead $2,100,000 $ 3,700,000
Manufacturing overhead allocated,
$36 55,000 machine-hours 1,980,000 —
180% $2,200,000 — 3,960,000
Underallocated (Overallocated) $ 120,000 $ (260,000)
4-1
4-30 Journal entries, T-accounts, and source documents.
1.
(1) Direct Materials Control 121,000
Accounts Payable Control 121,000
Source Document: Purchase Invoice, Receiving Report
Subsidiary Ledger: Direct Materials Record, Accounts Payable
(2) Work in Process Controla 112,400
Direct Materials Control 112,400
Source Document: Material Requisition Records, Job Cost Record
Subsidiary Ledger: Direct Materials Record, Work-in-Process Inventory Records by Jobs
(3) Work in Process Control 87,000
Manufacturing Overhead Control 54,400
Wages Payable Control 141,400
Source Document: Labor Time Sheets, Job Cost Records
Subsidiary Ledger: Manufacturing Overhead Records, Employee Labor Records, Work-in-
Process Inventory Records by Jobs
(4) Manufacturing Overhead Control 207,100
Maintenance Payable Control 46,000
Miscellaneous factory overhead payable Control 9,100
Accumulated Depreciation Control 53,000
Rent Payable Control 99,000
Source Document: Depreciation Schedule, Rent Schedule, Maintenance wages due, Invoices
for miscellaneous factory overhead items
Subsidiary Ledger: Manufacturing Overhead Records
(5) Work in Process Control 269,700
Manufacturing Overhead Allocated 269,700
($87,000 $3.10)
Source Document: Labor Time Sheets, Job Cost Record
Subsidiary Ledger: Work-in-Process Inventory Records by Jobs
(6) Finished Goods Controlb 449,600
Work in Process Control 449,600
Source Document: Job Cost Record, Completed Job Cost Record
Subsidiary Ledger: Work-in-Process Inventory Records by Jobs, Finished Goods Inventory
Records by Jobs
(7) Cost of Goods Soldc 478,600
Finished Goods Control 478,600
Source Document: Sales Invoice, Completed Job Cost Record
Subsidiary Ledger: Finished Goods Inventory Records by Jobs
(8) Manufacturing Overhead Allocated 269,700
Manufacturing Overhead Control
($54,400 + $207,100) 261,500
4-2
Cost of Goods Sold 8,200
Source Document: Prior Journal Entries
(9) Depreciation Expenses 7,700
Accumulated Depreciation, Office Equipment 7,700
Advertising expense 97,000
Advertising expense payable Control 97,000
Sales commission expense 39,000
Sales commission payable Control 39,000
Source Document: Depreciation Schedule, Marketing Payroll Request, Invoice for
Advertising, Sales Commission Schedule.
Subsidiary Ledger: Employee Salary Records, Administration Cost Records, Marketing Cost
Records.
a
Materials used = Beginning direct + Purchases – Ending direct
materials inventory materials inventory
= $9,400 + $121,000 − $18,000 = $112,400
b Cost of = Beginning WIP + Manufacturing – Ending WIP
goods manufactured inventory cost inventory
= $6,500 + ($112,400 + $87,000 + $269,700) − $26,000 = $449,600
c
Cost of goods sold = Beginning finished + Cost of goods – Ending finished
goods inventory manufactured goods inventory
= $60,000 + $449,600 − $31,000 = $478,600
2. T-accounts
Direct Materials Control
Bal. 1/1/2017 9,400 (2) Work-in-Process Control
(1) Accounts Payable Control (Materials used) 112,400
(Purchases) 121,000
Bal. 12/31/2017 18,000
Work-in-Process Control
4-3
Bal. 1/1/2017 6,500 (6) Finished Goods Control
(2) Materials Control (Cost of goods
(Direct materials used) 112,400 manufactured) 449,600
(3) Wages Payable Control
(Direct manuf. labor) 87,000
(5) Manuf. Overhead
Allocated 269,700
Bal. 12/31/2017 26,000
Finished Goods Control
Bal. 1/1/2017 60,000 (7) Cost of Goods Sold 478,600
(6) WIP Control
(Cost of goods manuf.) 449,600
Bal. 12/31/2017 31,000
Cost of Goods Sold
(7) Finished Goods Control (8) Manufacturing Overhead
(Goods sold) 478,600 Allocated (Adjust for
overallocation) 8,200
Manufacturing Overhead Control
(3) Wages Payable Control (8) To close 261,500
(Indirect manuf. labor) 54,400
(4) Salaries Payable Control
(Maintenance) 46,000
(4) Accounts Payable Control
(Miscellaneous) 9,100
(4) Accum. Deprn. Control
(Depreciation) 53,000
(4) Rent Payable Control
(Rent) 99,000
Bal. 0
Manufacturing Overhead Allocated
(8) To close 269,700 (5) Work-in-Process Control
(Manuf. overhead
allocated) 269,700
Bal. 0
4-4
