Wilson Printing Company began operations in January with three orders. The follo

Question

Wilson Printing Company began operations in January with three orders. The following costs were incurred during the month:

Direct Materials:

Harden Brochure : 850

Wright Annual Report: 750

Moore Pamphlet: 600

Direct Labor:

Harden Brochure: 2450

Wirght Anuual Report: 1950

Moore Pamphlet: 900

Manufacturing Overhead:

Applied at the rate of 110 percent of direct labor dollars

Actual manufactoring overhead incurred: 6100

The Harden Brochure and Wright Annual Report were completed and delivered during January. The Moore Pamphlet Job was incomplete at the end of the month. Selling prices were as follow: Harden Brochure $9400, and Wright Annual Report $6900.

a, Record the entries for all costs and revenues in T accounts, including T accounts for the job order cost cards.

b, Determine the amount of underapplied or overapplied manufacturing overhead for January and show the necessary adjustment journal entries. Any difference between actual manufactoring overhead and applied manufacturing overhead less than 5% is considered de minimus.

c, Determine the gross profit margin for the month of January.

Explanation / Answer

b.

The underapplied overhead cost percentage is less than 5% which is to be treated as de minimis. Otherwise the underapplied overhead cost will be transferred to WIP and Finished Goods Inventory account in the proportion of its cost then the journal entry would be as under:

WIP Account $64

Finished Goods inventory Account $207

Manufacturing overhead Account $270

(Being underapplied manufacturing ovehead cost transferred to WIP and FG Inventory Account)

c.

T accounts for all the revenues and expenses are as under: Direct Material   Particulars Amount Particulars Amount To Accounts payable (Harden Brochure) $ 850 By WIP   $         2,200 To Accounts payable (Wright Annual Report) $ 750 To Accounts payable (Moore Pamphlet) $ 600 Total   $ 2,200 Total $         2,200 Direct Labor Particulars Amount Particulars Amount To Accounts payable (Harden Brochure) $ 2,450 By WIP   $         5,300 To Accounts payable (Wright Annual Report) $ 1,950 To Accounts payable (Moore Pamphlet) $ 900 Total   $ 5,300 Total $         5,300 Manufacturing Overhead Particulars Amount Particulars Amount To Accounts payable   $ 6,100 By WIP (OH Applied) $         5,830 By   By WIP (Under applied OH portion of Moore) $             270 Total   $ 6,100 Total $         6,100 Total under applied Mnf. OH $ 270 Percentage Cost of Mnf.OH Cost of WIP $ 3,150 23.63% $         63.80 Cost of Finished goods inventory $        10,180 76.37% $       206.20 Total cost of WIP and FGInventory $        13,330 100% $ 270 Sales Account Particulars Amount Particulars Amount Balance $        16,300 By Accounts Receivables (Harden Brochure) $         9,400 By Accounts Receivables (Wright Annual Report) $         6,900 Total   $        16,300 Total $       16,300 WIP Account Particulars Amount Particulars Amount To Direct material $ 2,200 To Finished Goods Inventory (Harden and Wright) $       10,180 To Direct labor $ 5,300 To Balance (Moore pamplet) $         3,150 To Manufacturing overhead $ 5,830 Total   $ 13,330 Total $       13,330 Finished Goods Inventory Particulars Amount Particulars Amount To WIP $        10,180 To cost of goods sold $       10,180 Total   $        10,180 Total $       10,180 Cost of Goods sold Particulars Amount Particulars Amount To Finished Goods Inventory $        10,180 To transferred to income statement $       10,180 $ -   Total   $        10,180 Total $       10,180

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