Problem 20-1A (Part Level Submission) Lott Company uses a job order cost system

Question

Problem 20-1A (Part Level Submission)

Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $20,000, direct labor $12,000, and manufacturing overhead $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, Lott Company began production on Jobs 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.

Job No.

Direct Materials

Direct Labor

20,000

Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet for Job No. 50.

Job No. 50

Date

Direct Materials

Direct Labor

Manufacturing Overhead

Job No. 51

Date

Direct Materials

Direct Labor

Manufacturing Overhead

Job No. 52

Date

Direct Materials

Direct Labor

Manufacturing Overhead

1. Purchased additional raw materials of $90,000 on account. 2. Incurred factory labor costs of $70,000. Of this amount $16,000 related to employer payroll taxes. 3. Incurred manufacturing overhead costs as follows: indirect materials $17,000; indirect labor $20,000; depreciation expense on equipment $12,000; and various other manufacturing overhead costs on account $16,000. 4. Assigned direct materials and direct labor to jobs as follows.

Explanation / Answer

JOB NO: 50 Date Direct Direct Materials Labor Mfg OH Beginning 20000 12000 16000 January 10000 5000 6500 30000 17000 22500 Cost of completed job: Direct materials 30000 Direct labor 17000 Manufacturing OH 22500 Total 69500 JOB NO: 51 Date Direct Direct Materials Labor Mfg OH Beginning 0 0 0 January 39000 25000 32500 39000 25000 32500 Cost of completed job: Direct materials 39000 Direct labor 25000 Manufacturing OH 32500 Total 96500 JOB NO: 52 Date Direct Direct Materials Labor Mfg OH Beginning 0 0 0 January 30000 20000 26000 30000 20000 26000 Total Manufacturing Overheads: indirect materials 17000 indirect labor 20000 depreciation 12000 other costs 16000 65000 direct labor cost 50000 OH rate = (65000/50000)*100 = 130%

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