Southworth Company uses a job-order cost system and applies manufacturing overhe

Question

Southworth Company uses a job-order cost system and applies manufacturing overhead cost to jobs
on the basis of the cost of direct materials used in production. At the beginning of the current year,
the following estimates were made for the purpose of computing the predetermined overhead rate:
manufacturing overhead cost, $248,000, and direct materials cost, $155,000. The following transactions took place during the year (all purchases and services were acquired on account):
a. Raw materials purchased, $142,000.
b. Raw materials requisitioned for use in production (all direct materials), $150,000.
c. Utility bills incurred in the factory, $21,000.
d. Costs for salaries and wages were incurred as follows:
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $216,000
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
Selling and administrative salaries . . . . . . . . . . . . . 145,000
e. Maintenance costs incurred in the factory, $15,000.
f. Advertising costs incurred, $130,000.
g. Depreciation recorded for the year, $50,000 (90% relates to factory assets, and the remainder
relates to selling and administrative assets).
h. Rental cost incurred on buildings, $90,000 (80% of the space is occupied by the factory, and
20% is occupied by sales and administration).
i. Miscellaneous selling and administrative costs incurred, $17,000.
j. Manufacturing overhead cost was applied to jobs, $ ? .136 Chapter 3 Systems Design: Job-Order Costing
k. Cost of goods manufactured for the year, $590,000.
l. Sales for the year (all on account) totalled $1,000,000. These goods cost $600,000 to manufacture according to their job cost sheets.
The balances in the inventory accounts at the beginning of the year were as follows:
Raw Materials . . . . . . . . . . . $18,000
Work in Process . . . . . . . . . 24,000
Finished Goods . . . . . . . . . . 35,000
Required:
1. Prepare journal entries to record the above data.
2. Post your entries to T-accounts. (Don’t forget to enter the opening inventory balances above.)
Determine the ending balances in the inventory accounts and in the Manufacturing Overhead
account.
3. Prepare a schedule of cost of goods manufactured.
4. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of
Goods Sold. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.
6. Job 218 was one of the many jobs started and completed during the year. The job required
$3,600 in direct materials and 400 hours of direct labour time at a rate of $11 per hour. If the
job contained 500 units and the company billed at 75% above the unit product cost on the job
cost sheet, what price per unit would have been charged to the customer

Explanation / Answer

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