Job Cost Journal Entries and T Accounts Following are certain operating data for
ID: 2522958 • Letter: J
Question
Job Cost Journal Entries and T Accounts
Following are certain operating data for Redwood Manufacturing Company for January 2016:
Total sales were $2,000,000, on which the company earned a 40% gross profit. Redwood uses a predetermined manufacturing overhead rate of 110% of direct labor costs. Manufacturing overhead applied was $396,000. Exclusive of indirect material used, total manufacturing overhead incurred was $300,000; it was under-applied by $24,000.
Required
Compute the following items. (Set up T accounts for Materials Inventory, Work in Process Inventory, Finished Goods Inventory, and Manufacturing Overhead; fill in the known amounts; and then use the normal relationships among the various accounts to compute the unknown amounts.)
Materials Inventory Work in Process Inventory Finished Goods Inventory Beginning inventory $40,000 $50,000 $80,000 Ending inventory 70,000 60,000 56,000 Job Cost Journal Entries and T Accounts Following are certain operating data for Redwood Manufacturing Company for January 2016 Materials Inventory Work in Process Inventory Finished Goods Inventory $80,000 56,000 Beginning inventory $40,000 $50,000 Ending inventory 70,000 60,000 Total sales were $2,000,000, on which the company earned a 40% gross profit. Redwood uses a predetermined manufacturing overhead rate of 1 10% of direct labor costs. Manufacturing overhead applied was $396,000. Exclusive of indirect material used total manufacturing overhead incurred was $300,000: it was under-applied by $24,000 Required Compute the following items. (Set up T accounts for Materials Inventory. Work in Process Inventory, Finished Goods Inventory, and Manufacturing Overhead: fill in the known amounts; and then use the normal relationships among the various accounts to compute the unknown amounts.) a. Cost of goods sold b. Cost of goods manufactured C. Direct labor incurred d. Direct material used e. Indirect material used f. Total materials purchased Materials Inventory 40,000 0 (d) bal 0 (e) End balExplanation / Answer
Answer a Cost of goods sold = Total sales * (1-profit margin) = $2000000 * (1-0.40) = $12,00,000 Answer b Cost of goods manufactured Cost of goods sold $1,200,000.00 Add : Ending Finished Goods Inventory $56,000.00 Less : Beginning Finished Goods Inventory $80,000.00 Cost of goods manufactured $1,176,000.00 Answer c Direct labour incurred = Manufacturing overhead applied / Predetermined manufacturing overhead rate Direct labour incurred = $396000 / 110% = $3,60,000 Answer d Material Inventory Cost of manufacture for the period Beg.bal. $40,000.00 $430,000.00 (d) Cost of goods manufactured $1,176,000.00 (f) $580,000.00 $120,000.00 ( e ) Add : Ending work in process $60,000.00 End.bal. $70,000.00 Less : Beginning work in process $50,000.00 Cost of manufacture for the period $1,186,000.00 Work in process Inventory Beg.bal. $50,000.00 $1,176,000.00 (b) Direct Material used ( c ) $430,000.00 Cost of manufacture for the period $1,186,000.00 (d) $360,000.00 Less : Direct Labour incurred $360,000.00 $396,000.00 Less : Manufacturing overhead applied $396,000.00 End.bal. $60,000.00 Direct Material used $430,000.00 Manufacturing Overhead Answer e Beg.bal. $0.00 $396,000.00 Indirect material used (h) $300,000.00 Manufacturing overhead applied $396,000.00 ( e ) $120,000.00 Add : Under applied overhead $24,000.00 End.bal. $24,000.00 Less : Manufacturing overhead incurred (exclusive of indirect material used) $300,000.00 Indirect material used $120,000.00 Finished Goods Inventory Beg.bal. $80,000.00 $1,200,000.00 (a) Answer f (b) $1,176,000.00 Total material purchased End.bal. $56,000.00 Direct material used $430,000.00 Add : Indirect material used $120,000.00 Add : Ending material Inventory $70,000.00 Less : Beginning Material inventory $40,000.00 Total material purchased $580,000.00
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