Question

Christopher's Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2018 follow Raw Materials Inventory Work in Process Inventory Finished Goods Inventory $15.500 5.200 21,200 The following transactions occurred during January (a) Purchased materials on account for $26,200. () issued materials to production totaling $21,000, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials (c) Payroll costs totaling $19.500 were recorded as follows: $10.800 for assembly workers 2.700 for factory supervision 2.800 for administrative personnel 3.400 for sales commissions Id Recorded depreciation: $4800 for factory machines. $1,200 for the copier used in the administrative office (e) Recorded $1,700 of expired Insurance Forty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense m Paid 5.500 in other factory costs in cash a) Applied manufacturing overhead at a rate of 200 percent of direct labor cost (h) Completed jobs but one, the job cost sheet for the uncompleted job shows 52,200 for direct materials, $2,400 for direct labor, and $4,800 for applied overhead O Sold jobs costing $51,300. The revenue eamed on these jobs was 506,690 Required: 1. Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts: Raw Materials Inventory Work in Process Inventory c. Finished Goods Inventory. d. Cost of als Sold e Manufacturing Overhead Selling General and Administrative Expenses Sales Revenue 2. Determine how much gross profit the company would report during the month of January before any adjustment is made for the overhead balance 3. Determine the amount of over of underapplied overhead 4. Compute adjusted gross proftassuming that any over or underapplied overhead balance is adjusted directly to Cost of Goods Sold

Answer 1

UNADJUSTED GROSS PROFIT	15390
ADD: ADJUSTMENT:
OVER-APPLIED OVERHEAD	5720
ADJUSTED GROSS PROFIT	21110
WORKING NOTES:
RM INV.
DR.	AMT $	CR.	AMT $
OB	15500	WIP	18900
PUR	26200	MANUFOH	2100
		CB	20700
WIP INV.
OB	5200	FG	47100
RM	18900	CB	9400
DL- ASSEM	10800
OH	21600
FG INV.
OB	21200	COGS	51300
WIP	47100	CB	17000
MANUFACTURING OVERHEAD
RM	2100	WIP	21600
SUPERVISOR	2700
DEP FACT	4800
INSU	680
OTHER	5600
COGS - OVERAPP	5720
COGS
FG	51300
SELLING, GEN. & ADMIN EXP.
PERSONNEL	2600	CB	8220
COMMI	3400
DEP	1200
INSU	1020
INCOME STATEMENT:
SALES	66690
less: COGS	51300
GP W/O ADJ	15390
adds:Adj- overapp. OH	5720
ADJUST GP	21110