Question

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,166,200 in manufacturing overhead cost at an activity level of 563,000 machine-hours. The company spent the entire month of January working on a large order for 12,000 custom-made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow: a. Raw materials purchased on account, $314,000. b. Raw materials used in production, $259,000 (80% direct materials and 20% indirect materials). c. Labor cost accrued in the factory, $156,000 (one-third direct labor and two-thirds indirect labor). d. Depreciation recorded on factory equipment, $63,800. e. Other manufacturing overhead costs incurred on account, $85,200. f. Manufacturing overhead cost was applied to production on the basis of 40,770 machine-hours actually worked during the month. g. The completed job for 12,000 custom-made machined parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direc materials, direct labor, and applied overhead.) Required: 1. Prepare journal entries to record items (a) through (f) above [ignore item (g) for the moment). 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T- accounts. 3. Prepare a journal entry for item (g) above. 4. If 10,200 of the custom-made machined parts are shipped to the customer in February, how much of this job's cost will be included in cost of goods sold for February? Complete the question by entering your answers in the tabs below.

Answer 1

Transaction	General Journal				Debit	Credit
a.	Raw materials inventory				314,000
	Accounts payable					314,000
b.	Work in process inventory				207200
	Manufacturing overhead				51800
	Raw materials inventory					259,000
c.	Work in process inventory				52,000
	Manufacturing overhead				104,000
	Factory wages payable					156,000
d.	manufacturing overhead				63,800
	Accumulated depreciation					63,800
e.	Manufacturing overhead				85,200
	Accounts paybale					85,200
f.	work in process inventory				301698
	manufacturing overhead					301,698
	(4,166,200/563000)*40770
2)	Manufacturing overhead
	b.	51800	301698	f.
	c.	104,000
	d.	63,800
	e.	85,200
	end bal	3,102
	work in process
	b.	207200
	c.	52,000
	f.	301698
	end bal	560898
3)
g.	finished goods inventory				560898
	Work in process inventory					560898
4)	cost of goods sold
	unit cost	560898/12000=		46.74
	hence cost of goods sold (46.74*10400)=				476748