PROBLEM 16 See calendar for due date. Use the working papers provided. Dorman Pr

Question

PROBLEM 16 See calendar for due date. Use the working papers provided. 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 S25,000; direct labor $18,000; and manufacturing overhead S29,000. Job No. 49 had been completed at a cost of $101,000 and was part of finished goods inventory. There was a S35,000 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 S140,000, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $235,000 on account. 2. Incurred factory labor costs of $70,000. Of this amount S10,000 is related to employer payroll taxes 3. Incurred manufacturing overhead costs as follows: indirect materials S6,000; indirect labor S18,000; depreciation expense S23,000, accounts payable, S9,000 (for utilities and repairs) 4. Assigned direct materials and direct labor to jobs as follows Job No 50 51 52 Direct Materials Direct Labor S 10,000 29,000 30,000 S 8,000 17,000 21,000 5. The company uses direct labor cost as the activity base to assign overhead.

Explanation / Answer

a. Total Manufacturing OH 868000 Direct Labor cost 775000 Predetermined OH Rate=868000/775000= 1.12 times Direct labor cost c. Raw materials 235000 Accounts Payable 235000 Direct labor 70000 Wages Payable 60000 Employer Pay-roll taxes 10000 Mfg. OH 56000 Cash(6000+18000) 24000 Accumulated Depreciation 23000 Accounts payable 9000 d.. WIP Raw Materials 69000 Direct labor 46000 Mfg. OH 51520 e. Job 50 Job 51 Beginning WIP 72000 Direct materials 10000 29000 Direct Labor 8000 17000 Mfg. OH at 1.12*direct labor 8960 19040 Total cost 98960 65040 164000 Finished goods 164000 WIP 164000 (98960+65040) (Job 50& 51) f. Accounts Receivable 260000 Sales 260000 (120000+140000) (Job 49&50) COGS(101000+98960) 199960 Finished goods 199960 (Job 49&50) g.. WIP Inventory Job 52 Direct materials 30000 Direct Labor 21000 Mfg. OH at 1.12*direct labor 23520 Total cost 74520 h.. Total Mfg. OH incurred 56000 Mfg. OH applied to Jobs 51520 Mfg. OH under-applied for the mth. 4480

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