Problem D Log Cabin Homes, Inc., uses a job cost system to account for its jobs,

Question

Problem D Log Cabin Homes, Inc., uses a job cost system to account for its jobs, which are prefabricated houses. As of January 1, its records showed inventories as follows: Materials and supplies $100,000 Work in process (Job Nos. 22 and 23) 180,000 Finished goods (Job No. 21) 140,000 The work in process inventory consisted of two jobs: Direct materials Direct Manufacturing Total labor overhead Job No. 22 $36,000 $40,000 $20,000 23 0,000 28,000 16,000 $96,000 84,000 $180,000 $76,000 $68,000 Cost and sales data: Materials purchased on account, $400,000 Direct Materials used: Job No. 22, $60,000; Job No. 23, $120,000; Job No. 24, 180,000. Indirect materials used, $10,000. Direct labor costs: Job No. 22, $100,00o; Job No. 23, $200,000; and Job No. 24, $80,000 Indirect labor costs, $80,0oo. Overhead is assigned to jobs at $100 per machine-hour. Job No. 22 used 500 machine-hours, Job No. 23 used 1,000 machine-hours, and Job No. 24 used 300 machine-hours in January. . . . Job No. 22 and 23 were completed and transferred to Finished Goods Inventory Job No. 21 and 22 were sold on account for $1,200,oo0, total. Manufacturing overhead costs incurred, other than indirect materials and indirect labor, were depreciation, $60,00o, and heat, light, power, miscellaneous, $30,000 (to be paid next month). Required: a. Calculate the Job Cost for each job. b. Prepare journal entries to assign the costs to jobs using the job costs in part 1. c. Assuming selling and administrative expenses were $100,ooo, prepare an income statement.

Explanation / Answer

a) Job 22 Job 23 Job 24 Total Prior period cost 96000 84000 0 180000 Costs added during the month: Direct materials 60000 120000 180000 360000 Direct labor 100000 200000 80000 380000 Factory Overheads (500*100/1000*100/300*100) 50000 100000 30000 180000 Cost of production 306000 504000 290000 1100000 b) WIP Inventory 360000 Raw material inventory 360000 [To assign direct material costs to jobs] WIP Inventory 380000 Factory payroll 380000 [To assign direct labor costs to jobs] WIP Inventory 180000 Factory overhead 180000 [To assign overheads to jobs on the basis of MH] c) Sales revenue 1200000 Less: Cost of Jobs sold = 140000+306000 = 446000 Gross profit 754000 Less: Selling and administrative expenses 100000 Net Income 654000

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