Question

Tyler Tooling Company uses a job order cost system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $213,520 and total machine hours at 62,800. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job:    

	Job 101			Job 102			Job 103			Total
Direct materials used	$	12,000		$	8,700		$	4,900		$	25,600
Direct labor	$	16,400		$	5,100		$	4,900		$	26,400
Machine hours		1,100	hours		2,900	hours		1,100	hours		5,100	hours

Job 101 was completed and sold for $51,800.
Job 102 was completed but not sold.
Job 103 is still in process.

Actual overhead costs recorded during the first month of operations totaled $12,540.

Required:

1. Prepare a journal entry showing the transfer of Job 102 into Finished Goods Inventory upon its completion.

2. Record the transfer of the job sold to cost of goods sold account.

3. Record sales revenue and cash received.

4. Record the transfer of the manufacturing overhead account balance to cost of goods sold.

Answer 1

Predetermined overhead rate = Estimated total manufacturing overhead / Estimated total machine hours

Predetermined overhead rate = $213,520 / 62,800 = $3.4 per machine hour

	Job 101	Job 102	Job 103
Direct material	$12,000	$8,700	$4,900
Direct labor	16,400	5,100	4,900
Overhead applied	3,740 (1100*$3.4)	9,860 (2900*$3.4)	3,740 (1100*$3.4)
Total cost	$32,140	$23,660	$13,540

Over or under applied overhead = Actual manufacturing overhead - Applied manufacturing overhead

Over or under applied overhead = $12,540 - 17,340 (5,100*$3.4)

Over applied overhead = $4,800

	General Journal	Debit	Credit
1.	Work in process inventory	$23,660
	Finished goods inventory		$23,660
2.	Cost of goods sold	$32,140
	Finished goods inventory		$32,140
3.	Cash	$51,800
	Sales		$51,800
4.	Manufacturing overhead	$4,800
	Cost of goods sold		$4,800