Number 2, 3, 4, and 5 Marcelino Co.\'s March 31 inventory of raw materials is $8
ID: 2329212 • Letter: N
Question
Number 2, 3, 4, and 5
Marcelino Co.'s March 31 inventory of raw materials is $80,000. Raw materials purchases in April are PROBLEM SET A $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 factory 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 follow Production costs computed and recorded reports prepared C2 P1 P2 P3 P Job 306 Job 307 Job 308 Balances on March 31 Direct materials Direct labor $ 29,000 20,000 10,000 35,000 18,000 9,000 Costs during April Direct materials Direct labor 135,000 85,000 220,000 150,000 $100,000 105,000 Finished (sold) Finished (unsold) In process Required 1. Determine the total of each production cost incurred for April (direct labor, direct materials, and ap- 2. Prepare journal entries for the month of April to record the following. plied overhead) and the total cost assigned to each job (including the balances from March 31). a. Materials purchases (on credit) b. Direct materials used in production. c. Direct labor paid and assigned to Work in Process Inventory d. Indirect labor paid and assigned to Factory Overhead e. Overhead costs applied to Work in Process Inventory f. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in ca 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 ignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The Check (2) $5.000 amount is not material.) (3) Cost of goods 3. Prepare a schedule of cost of goods manufactured 4. Compute gross profit for April. Show how to present the inventories on the April 30 balance sheet. manufactured. $828.50o Analysis Component 5. The over- or underapplied overhead is closed to Cost of Goods Sold. Discuss how this adjustment mpacts business decision making regarding individual jobs or batches of jobs.Explanation / Answer
Marcelino Co.'s Requirement 1 Job 306 Job 307 Job 308 April Total Balances on March 31 Direct Materials 29000 35000 64000 Direct labor 20000 18000 38000 Applied Manfuacturing overhead 10000 9000 19000 Costs during April Direct Materials 135000 220000 100000 455000 Direct labor 85000 150000 105000 340000 Applied Manfuacturing overhead 42500 75000 52500 170000 Total cost 321500 507000 257500 1086000 Requirement 2 In the books of Lyan Date Account Title & Explanation Debit Credit Amount in Amount in Raw material Inventory 500000 Material Purchase Accounts payable 500000 Work In process Inventory 455000 Materials used Raw Materials Inventory 455000 Wages 340000 Direct Labor Cash 340000 Work In process Inventory 340000 Direct Labor assigned Wages 340000 Wages 23000 Indirect Labor Cash 23000 Manufacturing overhead 23000 Indirect labor Manufacturing Wages 23000 Work In process Inventory 170000 Manufacturing overhead 170000 Factory Rent 32000 Factory Utiltities 19000 Cash 51000 Manufacturing Overhead 152000 Factory Rent 32000 Factory Utiltities 19000 Depreciation on Factory equipment 51000 Raw Material Inventory 50000 Finished goods Inventory 321500 Transfer of Job 306 & 307 Finished goods Inventory 507000 Work In process Inventory 828500 Cost of goods sold 321500 Finished goods Inventory 321500 Accounts receivable/Cash 635000 Revenue from sales Revenue from sales 635000 Cost of goods sold 5000 Overhead under applied Manufacturing Overhead 5000 Requirement 3 Schedule of cost of goods manufactured Total Manufacturing costs 1086000 Total cost of work In process 257500 Cost of goods manufactured 828500 Requirement 4.1 Gross Profit for april Sales 635000 Less : cost of goods sold 326500 Gross Profit 308500 Requirement 4.2 Presentation of Invnentory on April 30 balance sheet Inventories Raw Materials 75000 =80000+500000-455000-50000 Work In Process 257500 From the table Finished goods 507000 From the table Requirement 5 The underapplied overhead are debited to cost of goods sold for the period. Eventhough it belongs to all three jobs, it is debited to cost of goods sold of only one job. It may thus impacts business decesion making. The other options is to charge the underapplied overhead to finished goods inventory and work in process inventory in proportionate amount. It implies that we have charged underapplied overhead to batches of job rather than individual job as done in this solution.
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