The University of BostonBoston Press is wholly owned by the university. It perfo
ID: 2541591 • Letter: T
Question
The University of
BostonBoston
Press is wholly owned by the university. It performs the bulk of its work for other university departments, which pay as though the press were an outside business enterprise. The press also publishes and maintains a stock of books for general sale. The press uses normal costing to cost each job. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost pool (manufacturing overhead, allocated on the basis of direct manufacturing labor costs). The following data (in thousands) pertain to 2017:
Direct materials and supplies purchased on credit $840
Direct materials used 740
Indirect materials issued to various production departments 140
Direct manufacturing labor 1,350
Indirect manufacturing labor incurred by various production departments 950
Depreciation on building and manufacturing equipment 440
Miscellaneous manufacturing overhead* incurred by various production departments
(ordinarily would be detailed as repairs, photocopying, utilities, etc.) 540
Manufacturing overhead allocated at 170% of direct manufacturing labor costs ?
Cost of goods manufactured 4,130
Revenues 8,900
Cost of goods sold (before adjustment for under- or overallocated manufacturing overhead) 4,050
Inventories, December 31, 2016 (not 2017):
Materials Control 160
Work-in-Process Control 60
Finished Goods Control 530
*The term manufacturing overhead is not used uniformly. Other terms that are often encountered in printing companies include job overhead and shop overhead.
1.
2.
3.
Show posted T-accounts for all inventories, Cost of Goods Sold, Manufacturing Overhead Control, and Manufacturing Overhead Allocated.
4.
1.
Identify the components of the overview diagram of the job-costing system at the University of Boston Press.2.
Prepare journal entries to summarize the 2017 transactions. As your finalentry, dispose of the year-end under- or overallocated manufacturing overhead as a write-off to Cost of Goods Sold. Number your entries. Explanations for each entry may be omitted.3.
Show posted T-accounts for all inventories, Cost of Goods Sold, Manufacturing Overhead Control, and Manufacturing Overhead Allocated.
4.
How did the University of Boston Press perform in 2017?Explanation / Answer
Dr. Cr. 1 Materials Inventory Control 840 Accounts Payable Control 840 To record purchase of direct materials & supplies. 2 Work-in-Process Inventory Control 740 Manufacturing Overhead Control 140 Materials Inventory Control 880 To record direct materials and supplies used. 3 Work-in-Process Inventory Control 1,350 Manufacturing Overhead Control 950 Wages Payable 2,300 To record manufacturing labor. 4 Manufacturing Overhead Control 440 Accumulated Depreciation -- Building and Manufacturing Equipment 440 To record depreciation of building and manufacturing equipment 5 Manufacturing Overhead Control 540 miscellaneous accounts 540 To record miscellaneous factory overhead. 6 Work-in-Process Inventory Control 2,295 Applied Manufacturing Overhead 2,295 To assign manufacturing overhead to WIP based on DML dollars. ($1,350 X 170%) 7 Finished Goods Inventory Control 4,130 Work-in-Process Inventory Control 4,130 To record the cost of goods manufactured. 8 Accounts Receivable Control or Cash 8,900 Sales Revenues 8,900 To record sales revenue. 9 Cost of Goods Sold 4,050 Finished Goods Inventory Control 4,050 To record the costs of the goods sold 10 Applied Manufacturing Overhead 2,295 Manufactured Overhead Control 2,070 Cost of Goods Sold 225 To adjust for the over application of manufacturing overhead. 26,670 26,670 Materials Inventory Control BOY 160 J/E #1 840 880 J/E #2 EOY 120 Work-in-Process Inventory Control BOY 60 J/E #2 740 J/E #3 1,350 J/E #6 2,295 4,130 J/E #7 EOY 315 Finished Goods Inventory Control BOY 530 J/E #7 4,130 4,050 J/E #9 EOY 610 Manufacturing Overhead Control BOY 0 J/E #2 140 J/E #3 950 J/E #4 440 J/E #5 550 2,070 J/E #10 EOY 10 Applied Manufacturing Overhead BOY 0 2,295 J/E #6 J/E #10 2,295 EOY 0 Cost of Good Sold BOY 0 J/E #9 4,050 225 J/E #10 EOY 3,825 a. Gross margin. Sales $8,900 Less Cost of Goods Sold 3,825 Gross Margin $5,075 57.02% The gross margin percentage of over 51% is quite good. In general, GM ratios above 30% are considered good b. The company did a good job of estimating MOH. Overhead was overapplied by only $130 or about 6.7% (130/1,950).
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