2) Allenton Company is a manufacturing firm that uses job-order costing. At the

Question

2) Allenton Company is a manufacturing firm that uses job-order costing. At the beginning of the year, the company's inventory balances were as follows:

Raw materials: $26,000

Work in process $47,000

Finished goods $133,000

The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 31,000 machine-hours and incur $248,000 in manufacturing overhead cost. The following transactions were recorded for the year:

a. Raw materials were purchased, $421,000.
b. Raw materials were requisitioned for use in production, $408,000 ($387,000 direct and $21,000 indirect).
c. The following employee costs were incurred: direct labor, $145,000; indirect labor, $61,000; and administrative salaries, $190,000.
d. Selling costs, $138,000.
e. Factory utility costs, $14,000.
f. Depreciation for the year was $121,000 of which $114,000 is related to factory operations and $7,000 is related to selling, general, and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 29,000 machine-hours.
h. The cost of goods manufactured for the year was $783,000.
i. Sales for the year totaled $1,107,000 and the costs on the job cost sheets of the goods that were sold totaled $768,000.
j. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.

Required:

Complete the following T-accounts (or journal entries) by recording the beginning balances and each of the transactions listed above. Assume all transactions are conducted with cash.

Explanation / Answer

1 a. Raw Materials 421,000 Cash 421,000 b. Work in Process 387,000 Manufacturing Overhead 21,000 Raw Materials 408,000 c. Work in Process 145,000 Manufacturing Overhead 61,000 Salaries Expense 190,000 Cash 396,000 d. Selling expense 138,000 Cash 138,000 e. Manufacturing Overhead 14,000 Cash 14,000 f. Manufacturing Overhead 114,000 Depreciation Expense 7,000 Accumulated Depreciation 121,000 g. Work in Process 232,000 Manufacturing Overhead 232,000 Predetermined Overhead Cost = Estimated total manufacturing overhead cost/Estimated total amount of the allocation base 248000 / 31000 = $8 per Mh 29000 actual MH × $ 8 per MH = $ 232,000. h. Finished Goods 783,000 Work in Process 783,000 i. Cash 1,107,000 Sales 1,107,000 Cost of Goods Sold 768,000 Finished Goods 768,000 j. Manufacturing Overhead 22,000 Cost of Goods Sold 22,000 Overapplied overhead: 210,000 incurred – 232,000 applied = 22,000 overapplied Note: question has not specified T-Accounts so, I have provided Journal entry since it is optional to provide T-Accounts.

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