Business decision case B Quality Painters, Inc., uses a job cost system. As of J
ID: 2546231 • Letter: B
Question
Business decision case B Quality Painters, Inc., uses a job cost system. As of January 1, its records showed the following inventory balances: Materials 7,000 Work in process $ 50,000 Finished goods 0 The work in process inventory consisted of two jobs: Direct Direct Job No. materials labor Overhead Total 100-Community housing $9,000 12,000 4,000 25,000 25,000 Totals 19000 21000 10000 0000 101- Regal apartments 10,000 9.000 6.000 Here are data for the company in January: a. Materials purchased, $90,000. b. Direct labor costs: direct labor to Job No. 100, $20,000; to Job No. 101, $48,000; and to Job No. 102 (a new job), $50,000. Indirect labor, $10,000. Direct materials used: direct materials for Job No. 100, $15,600; for Job No. 101, $28,800; and for Job No. 102, $48,000. Supplies (indirect materials) used amounted to $4,000. Overhead is assigned to jobs at $5 per labor-hour, with 1,000 labor-hours to Job 100 and 2,000 labor-hours each to Jobs 101 and 102. c. d. e. f g. All three jobs were completed in January h. Sales revenues for January were $350,000 for the three jobs. i. Actual overhead costs incurred other than indirect labor and indirect materials were depreciation, $6,000, and utilities, fuel, and miscellaneous, $5,000. Required: 1. 2. Prepare a job cost sheet for each job. Prepare journal entries for the January activity (labeled a to i above) assuming ll purchases and sales were on credit Prepare an income statement for January assuming selling and administrative expenses for January were $50,000 3. 4. Is the company profitable (that is, showing net income greater than zero)? What suggestions can you make for management to help increase the company's net income?Explanation / Answer
1 Job cost sheet for each job: 100 101 102 Beg. Work in process inventory 25000 25000 0 Direct materials 15600 28800 48000 Direct labor 20000 48000 50000 Applied overhead 5000 10000 10000 (1000*5) (2000*5) (2000*5) Total actual job cost 65600 111800 108000 2 Journal entries: Transaction Account titles and explanation Debit Credit a. Materials inventory 90000 Accounts payable 90000 (Material purchased) b. Work in process 118000 Factory payroll 118000 (Direct labor cost incurred) c. Manufacturing overhead 10000 Factory payroll 10000 (Indirect labor incurred) d. Work in process 92400 Materials inventory 92400 (Direct materials used) e. Manufacturing overhead 4000 Accounts payable 4000 (Supplies used) f. Work in process 25000 Manufacturing overhead 25000 (Overhead applied) g. Finished goods inventory 285400 Work in process 285400 (Transfer all jobs to finished goods) h. Accounts receivable 350000 Sales 350000 (Sales revenue recorded) Cost of goods sold 285400 Finished goods inventory 285400 (Cost of jobs sold) I. Manufacturing overhead 11000 Accounts payable 11000 (Overhead cost incurred) 3 Income statement Sales 350000 Less:Cost of goods sold 285400 Gross profit 64600 Less:Selling and admin expenses 50000 Net income 14600 4 Company is profitable since net income is > 0. Measures to improve net income 1) Increase sales volume 2) Increase selling price 3) Reduce cost of goods sold 4) Reduce selling and admin expense
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.