Watson Manufacturing Company employs a job order cost accounting system and keep

Question

Watson Manufacturing Company employs a job order cost accounting system and keeps perpetual inventory records. The following transactions occurred in the first month of operations: 1. Direct materials requisitioned during the month Job 101 Job 102 Job 103 $20,000 16,000 24,000 60.000 2. Direct labor incurred and charged to jobs during the month was: Job 101 Job 102 Job 103 $32,000 28,000 20,000 Manufacturing overhead was applied to jobs worked on using a predetermined overhead rte based on 75% of direct labor costs. 3. Actual manufacturing overhead costs incurred during the month amounted to $66,000. 4. Job 101 consisting of 1,000 units and Job 103 consisting of 200 units were completed during the month 5. Instructions (a) Prepare journal entries to record the above transactions (b) Answer the following questions: 1. How much manufacturing overhead was applied to Job 103 during the month? 2. Compute the unit cost of Jobs 101 and 103. 3. What is the balance in Work In Process Inventory at the end of the month? 4. Determine if manufacturing overhead was under-or overapplied during the month. How much?

Explanation / Answer

a Date Account title and explanation Debit Credit 1 Work in Process 60000 Raw materials Inventory 60000 (To record raw materials use) 2 Work in process 80000 Wages Payable 80000 (To record wages ) 3 Work in process 60000 Manufacturing overhead 60000 (To record application of overhead) 4 Manufacturing overhead 66000 cash 66000 (To record incurrence of manufacturing overhead) 5 Finished goods 135000 Work in process 135000 (To record transfer to finish goods) b Manufacturing overhead applied to Job 103 18000 Unit cost of Job 101   = 76 (20000+32000*1.75 Unit cost of Job 103 = 295 (24000+20000*1.75)/200 Balance in work in process 65000 Under application of overhead    = 6000

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