Deglman Manufacturing uses a job order cost system and applies overhead to produ
ID: 2461189 • Letter: D
Question
Deglman Manufacturing uses a job order cost system and applies overhead to production
on the basis of direct labor costs. On January 1 2012 Job No. 50 was the only job in process
The costs incurred prior to Januray 1 on this job were as follows: Direct Materials was $ 20,000
diect labor was $12,000 and the manufacturing overhead was $ 16,000. As of January 1 Job No 49
had been completed at a cost of$90,000 and was part of Finished Goods inventory. There was
a $15,000 balance in the Raw Materials Inventory account.
During the month of January Deglman Manufacturing began production on Jobs No. 51 and 52
and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $122,000
and $158,000 respectively. The following additional events occurred during the month.
1. Purchased additional raw materials on $90,000 on account
2. Incurred factory labor costs on $70,000. Of this amount $16,000 related to employer payroll taxes
3. Incurred manaufactuirng overhead costs as follows: indirect materials, $17,000 indirect labor $20,000.
depreciation expense on equipment $ 19,000 and various other costs of on accoutn of $16,000
4. Assigned diect materials and direct labor to jobs as follows
Job Number Direct Materials Direct Labor
50
Requirements
1. Calculate the predetermined overhead rate for 2012, assuming Deglman Manufactuirng
estimates total manufactuirng overhead costs of $980,000 direct labor costs of $700,000 and
diect labor hours on 20,000 for the year
2. Prepare the journal entries to record the purchases of raw materilas, factory labor costs incurred
and the manufacturing overhead costs incurred during the month of January
3. Prepare the journal entried to record the assignment of direct materials, direct labor and manufacturing
overhead costs to production.
4. Prepare the journal entries to record the sale of any jobs during the month of January
5. Calculate the balance in the Finished Goods Inventory at the end of the month
6. Is overhead under or over applied and by how much.
50
10,000 5,000 51 39,000 25,000 52 30,000 20,000Explanation / Answer
Estimates total manufacturing overhead costs of $980,000 direct labor costs of $700,000 and
Direct labor hours on 20,000 for the year
Sol:
Predetermined Overhead rate = Total Manufacturing Overhead costs / Direct labor cost
Predetermined Overhead rate = $980,000 / $700,000
Predetermined Overhead rate = 140% of Direct labor costs.
Sol:
Raw Materials Inventory $70,000
Accounts Payable $70,000
Factory Labor $70,000
Factory Wages payable $54,000
Employer Payroll Taxes payable $16,000
Manufacturing Overhead $72,000
Factory Labor $20,000
Accumulated Depreciation $19,000
Raw Material Inventory $17,000
Accounts Payable $16,000
Sol:
Work in Process inventory $79,000
Raw Materials Inventory
(10,000 + 39,000 + 30,000) $79,000
Work in Process inventory $50,000
Factory Labor
(5,000 + 25,000 + 20,000) $50,000
Work in Process Inventory $70,000
Manufacturing Overhead
(140% of direct labor cost) $70,000
Sol:
Accounts Receivable $280,000
Sales ($122,000 + $158,000) $280,000
Coast of Goods sold $$160,000
Finished Goods Inventory
($90,000 + 70,000) $160,000
Job No. 50
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Beginning
20,000
12,000
16,000
January
10,000
5,000
7,000
30,000
17,000
23,000
Total Cost of Completed Job (30000+17000+23000)
70,000
Sol:
Job No. 51
Date
Direct Materials
Direct Labor
Manufacturing Overhead
January
39,000
25,000
35,000
39,000
25,000
35,000
Total Cost of Completed Job (30000+17000+23000)
99,000
Finished Goods Inventory
Beginning Balance
90000
Cost of Jobs 49 and50 Sold
160000
Cost of Completed Job 50 and 51
169000
Ending Balance
99000
The Balance in this Account consists of the cost of completed Job No. 51 which has not yet been sold.
Manufacturing Overhead
Actual
Applied
72000
70000
2000
Sol:
The balance in the Manufacturing Overhead account is Under Applied.
Job No. 50
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Beginning
20,000
12,000
16,000
January
10,000
5,000
7,000
30,000
17,000
23,000
Total Cost of Completed Job (30000+17000+23000)
70,000
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