Dorman Products Company uses a job order cost system and applies overhead to pro

Question

Dorman Products Company uses a job order cost system and applies overhead to production on the basis of direct labor cost. 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 $27,000; direct labor $16,000; and manufacturing overhead $24,000. Job No. 49 had been completed at a cost of $99,000 and was part of finished goods inventory. There was a $30,000 balance in the Raw Materials inventory account. During the month of January, the company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were sold on account during the month for $120,000 and $150,000, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $260,000 on 2. Incurred factory labor costs of $61,000. Of this amount $11,000 is related to employer payroll taxes. 3. Incurred manufacturing overhead costs as follows: indirect materials $5,000, indirect labor $17,000; depreciation expense $22,000 and accounts payable $9,000 (for utilities and repairs). 4. Assigned direct materials and direct labor to jobs as follows Job No 50 51 52 Direct Materials $ 8,000 Direct Labo S 7,000 16,000 20,000 32,000 5. The company uses direct labor cost as the activity base to assign overhead (a) Calculate the predetermined overhead rate for the year 2017, assuming Dorman Products Company (b) Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet (c) Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, (d) Prepare the journal entries to record the assignment of direct materials, direct labor, and (e) Prepare the journal entry to record the completion of Job 50 and Job 51 during the month by using () Prepare the journal entries to record the sale of Job 49 and Job 50 during the month Manufacturing estimates total manufacturing overhead costs of $856,800 and direct labor costs of $680,000. for Job No. 50. (This can be done also when you get to parts d. and e.) and the manufacturing overhead costs incurred during the month of January manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in (a). Post all costs to the job cost sheets as necessary the total from the job cost sheets that were completed during the month (B) What is the balance in the Work in Process Inventory account at the end of the month? What does this balance consist of? (For example which Job and what specific costs.) (b) What is the amount of over- or underapplied overhead for the month?

Explanation / Answer

(a) Predetermined overhead rate=Total manufacturing overhead cost/Direct labor cost=856800/680000=$1.26 per direct labor cost (b) Job cost sheets Job No.50 Job No.51 Job No.52 Date Direct Materials Direct Labor Manufacturing Overhead Date Direct Materials Direct Labor Manufacturing Overhead Date Direct Materials Direct Labor Manufacturing Overhead Jan 1. 27000 16000 24000 29000 16000 20160 32000 20000 25200 8000 7000 8820 (16000*1.26) (20000*1.26) (7000*1.26) 35000 23000 32820 Cost of completed job Direct materials 29000 Cost of completed job Direct Labor 16000 Direct materials 35000 Manufacturing Overhead 20160 Direct Labor 23000 Total cost 65160 Manufacturing Overhead 32820 Total cost 90820 © Account titles Debit Credit Raw material inventory 260000 Accounts payable 260000 (Purchase of raw materials) Factory labor 61000 Wages payable 11000 Employer payroll taxes payable 50000 (Factory labor cost incurred) Manufacturing overhead 53000 Raw material inventory 5000 Factory labor 17000 Accumulated depreciation 22000 Accounts payable 9000 (Manufacturing overhead cost incurred) (d) Work in process inventory 69000 Raw material inventory 69000 (Assignment of direct materials) Work in process inventory 43000 Factory labor 43000 (Assignment of direct labor) Work in process inventory 54180 Manufacturing overhead (43000*1.26) 54180 (Assignment of manufacturing overhead) (e) Finished goods inventory 90820+65160 155980 Work in process inventory 155980 (Completion of Job 50 & 51) (f) Accounts receivable (120000+150000) 270000 Sales revenue 270000 (Recorded sales) Cost of goods sold (99000+90820) 189820 Finished goods inventory 189820 (Recorded cost of goods sold) (g) Work in process inventoey balance=Cost of Job 52=32000+20000+25200=77200 (h) Overapplied overhead=Applied overhead-Actual overhead=54180-53000=1180

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