Sweeten Company had no jobs in progress at the beginning of March and no beginni

Question

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March—Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):

500

1. What is the company’s predetermined overhead rate?

2. How much manufacturing overhead was applied to Job P and Job Q?

3. What is the direct labor hourly wage rate?

4a.If Job P includes 30 units, what is its unit product cost?

4b.What is the total amount of manufacturing cost assigned to Job Q as of the end of March (including applied overhead)?

5. Assume the ending raw materials inventory is $2,000 and the company does not use any indirect materials. Prepare the journal entries to record raw materials purchases and the issuance of direct materials for use in production

6.Assume that the company does not use any indirect labor. Prepare the journal entry to record the direct labor costs added to production

7.Prepare the journal entry to apply manufacturing overhead costs to production.

8.Assume the ending raw materials inventory is $2,000 and the company does not use any indirect materials. Prepare a schedule of cost of goods manufactured.

9.Prepare the journal entry to transfer costs from Work in Process to Finished Goods

10.Prepare a completed Work in Process T-account including the beginning and ending balances and all debits and credits posted to the account.

11.Prepare a schedule of cost of goods sold.

12.Prepare the journal entry to transfer costs from Finished Goods to Cost of Goods Sold

13.What is the amount of underapplied or overapplied overhead?

14.Prepare the journal entry to close the amount of underapplied or overapplied overhead to Cost of Goods Sold

15.Assume that Job P includes 30 units that each sell for $2,800 and that the company’s selling and administrative expenses in March were $10,500. Prepare an absorption costing income statement for March.

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March—Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):

Explanation / Answer

Solution:

(A). Caluculation of Predetermined Overhead Rate:

Predetermined Overhead Rate = $ 19,000 / 3,000 hrs

= $ 6.33  

(B). Overhead Appiled to Job 'P' and Job 'Q'   

  Overhead Appiled Rate = $ 2,100 * 6.33

   = $ 13,293

  Overhead Appiled Rate = $ 500 * 6.33

= $ 3,165

(C). Direct Labour Hourly Wage Rate:

JOB (P):

Labour hourly Wage Rate = $31,500 / 2,100 hrs

= $ 15

JOB (Q):

Labour hourly Wage Rate = $ 7,500 / 500 hrs

   = $ 15

(D) 1. Unit Product Cost Job 'P':   

   Unit Product Cost = $ 51,000 / 30 Units

   = $ 1,700

Unit Product Cost Job 'Q':   

   Unit Product Cost = $ 16,500 / 30 Units

= $ 550

(E). Raw Materials Purhcase:

   Raw Material Inventory $ 2,000

Accounts Payable $ 2,000

(F). Journal Entrry For Direct Labour Cost of Production Job P & Q:

Work-in Process Inventory 39,000

Wages Payable 39,000

(G). Journal Entry to Transfer Costs from Work in Process to Finished Goods

Work-in Process Inventry

   Finished Goods

(H). Journal Entry For Transfer Finished Godds to Cost of Goods Sold:

Finished Goods

Work-in Process

(J). Over and Under Applied Overheads:

Overhead is Underer-Applied:

(K). Overhead is Over-Applied:

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