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ID: 2329018 • Letter: R
Question
Required information
[The following information applies to the questions displayed below.]
Widmer Watercraft’s predetermined overhead rate for the year 2017 is 200% of direct labor. Information on the company’s production activities during May 2017 follows.
Purchased raw materials on credit, $200,000.
Materials requisitions record use of the following materials for the month.
131,900
Paid $16,000 cash to a computer consultant to reprogram factory equipment.
Time tickets record use of the following labor for the month. These wages were paid in cash.
Applied overhead to Jobs 136, 138, and 139.
Transferred Jobs 136, 138, and 139 to Finished Goods.
Sold Jobs 136 and 138 on credit at a total price of $550,000.
The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).
Applied overhead at month-end to the Work in Process Inventory account (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.
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.
131,900
Indirect materials 21,000 Total materials used $ 152,900Explanation / Answer
Widmer Watercraft
Report showing total cost of each job in process:
Job No. 136
Job No. 137
Job No. 138
Job No. 139
Job No. 140
Direct Materials
$49,500
$33,000
$19,600
$23,000
$6,800
Direct Labor
$12,000
$10,500
$37,500
$39,000
$3,800
Overhead at 200% of Direct Labor
$24,000
$21,000
$75,000
$78,000
$7,600
Total cost
$85,500
$64,500
$132,100
$140,000
$18,200
Report of Job Costs
Work in Process Inventory
Job 137
$64,500
Job 140
$18,200
Balance
$82,700
Finished Goods Inventory
Job 139
$140,000
Balance
$140,000
Cost of Goods Sold
Job 136
$85,500
Job 138
$132,100
Balance
$217,600
Calculations:
overhead applied to jobs 136, 138 and 139
(12,000 + 37,500 + 39,000) x 200%
88,500 x 200%
$177,000
The entry would be,
Work in process inventory
$177,000
Factory overhead
$177,000
transfer of jobs completed (jobs 136, 138 and 139)to finished goods
$85,500 + $132,100 + $140,000
$357,600
The entry would be,
Finished goods inventory
$357,600
Work in process in inventory
$357,600
Jobs 136 and 138 sold on credit at a total price of $550,000
Cost of sales on these jobs, 136 and 138 would be
$85,500 + $133,100
$217,600
overhead applied to Work in Process inventory account on jobs 137 and 140
($10,500 +$3,800) x 200%
$28,600
Work in Process Inventory
Particulars
Debit
Credit
Balance
Direct Materials
$125,100
Direct labor
$112,800
factory overhead
$177,000
Finished goods inventory
$357,600
overhead applied to jobs
$28,600
Totals
$443,500
$443,500
0
Ending balance
$85,900
Finished Goods Inventory
Particulars
Debit
Credit
Balance
Work in Process Inventory
$357,600
Cost of sales
$217,600
Ending Balance
$140,000
Factory Overhead
Particulars
Debit
Credit
Balance
Factory equipment
$16,000
indirect materials
$21,000
indirect labor
$25,500
Work in Process Inventory
$177,000
overhead applied
$28,600
Accu. Depreciation
$69,000
Accu. Depreciation on building
$38,500
Prepaid insurance
$10,000
Property taxes payable
$35,000
Ending balance
$9,400
Job No. 136
Job No. 137
Job No. 138
Job No. 139
Job No. 140
Direct Materials
$49,500
$33,000
$19,600
$23,000
$6,800
Direct Labor
$12,000
$10,500
$37,500
$39,000
$3,800
Overhead at 200% of Direct Labor
$24,000
$21,000
$75,000
$78,000
$7,600
Total cost
$85,500
$64,500
$132,100
$140,000
$18,200
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