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): Estimated total fixed manufacturing overhead $ 10,000 Estimated variable manufacturing overhead per direct labor-hour $ 1.00 Estimated total direct labor-hours to be worked 2,000 Total actual manufacturing overhead costs incurred $ 12,500 Job P Job Q Direct materials $ 13,000 $ 8,000 Direct labor cost $ 21,000 $ 7,500 Actual direct labor-hours worked 1,400 500

Explanation / Answer

Answer 2. Total Estimated Manufacturing Overhead = Fixed Overhead + Variable Overhead Total Estimated Manufacturing Overhead = $10000 + $1 X 2000 Hrs = $12000 Predetermined Manufacturing Overhead Rate per direct labour hr = $12000 / 2000 hrs = $6 per hr. Manufacturing Overhead Applied Job P - $6 X 1400 hrs = $8400 Job Q - $6 X 500 hrs = $3000 Answer 3. Direct Labour Hourly Rate = $21000/ 1400 = $15 per direct Labour (If we calculate with Job Q, we will get the same answer for Direct labour hourly rate) Answer 4-a. Unit Product Cost of Job P = (13000 (Direct Material) + 21000 (Direct Labour) + $6 X 1400 (Manufacturing overhead)) / 20 Units Unit Product Cost of Job P = $2120 per Unit Answer 4-b. Calculation of Manufacturing cost of Job Q Direct Material                      8,000 Direct Labor                      7,500 Manufacturing Overhead - $ 6 X 500 hrs                      3,000 Total Manufacturing Costs                   18,500 Answer 5. Journal Entry Direct Material                                                  Dr. 22300    To Accounts Payable / Cash 22300 (Purchase of direct material) WIP - Job P                                                          Dr. 13000 WIP - Job Q                                                          Dr. 8000    To Direct Materials 21000 (Material issued to Job P and Job Q) Answer 6. Journal Entry Direct Labour                                                      Dr. 28500    To Cash 28500 (Direct Labour paid) WIP - Job P                                                          Dr. 21000 WIP - Job Q                                                          Dr. 7500     To Direct Labour 28500 (Labour applied to Job P and Job Q) Answer 7. Journal Entry Manufacturing Overhead                            Dr. 12500     To Cash 12500 (Manufacturing Overhead paid) WIP - Job P                                                          Dr. 8400 WIP - Job Q                                                          Dr. 3000     To Manufacturing Overhead 11400 (Manufacturing overhead applied to Job P and Job Q at predetermined overhead rate $6 per direct labor hour) WIP - Job P                                                          Dr.                         811 WIP - Job Q                                                          Dr.                         289     To Manufacturing Overhead 1100 (Underapplied Overhead transferred to Job P and Job Q in the ratio of actual direct labour hour) Answer 8. Job P Job Q Direct Material 13000 8000 Direct Labour 21000 7500 Manufacturing Overhead 8400 3000 Under Applied Manufacturing Overhead                         811                      289 Total Cost                   43,211                18,789 Cost of Goods Manufactured = WIP in the beginning + Direct Material + Direct Labour + Maznufacturing Overhead - WIP in the end Cost of Goods Manufactured = $0 + $21000 + $28500 + 12500 - 18789 = $43211 Answer 9. Journal Entry WIP - Job P                                                          Dr.                   43,211    To Finished Goods - Inventory                  43,211 (Job P is completed and transferred to finished goods) Note : Job Q is not completed and it is to be shown in the WIP at the end. So, Job Q is not transferred to Finished Goods Inventory Answer 10. WIP A/c Particulars Amount Particulars Amount To WIP in beginning                    -   By Finished Inventory   To Direct Material   Job P          43,211 Job P           13,000 Job Q             8,000 By WIP at the End To Direct Labor Job Q          18,789 Job P           21,000 Job Q             7,500 To MOH Job P             8,400 Job Q             3,000 To Under-applied MOH Job P                 811 Job Q                 289           62,000          62,000 Answer 11. Cost of Goods Sold = Finished Goods at beginning + Cost of Goods Manufactured - Finished Goods at end Cost of Goods Sold = $0 + $43211 - $0 = $43211 Answer 12. MOH Applied Job P 8400 Job Q 3000 Total Predetremined Ovehead 11400 Actual Manufacturing Overhead 12500 Under applied Overhead 1100

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