Question

O pronu ve reported for 2017. in custom patios. The patios are 15-3A Case Inc. is a construction company specializing in custom patios. constructed of concrete, brick, fiberglass, and lumber, dependingu berglass, and lumber denending upon customer preres ence. On June 1, 2017, the general ledger for Case Inc, contains the com Raw Materials Inventory Work in Process Inventory $4.200 $5,540 Manufacturing Overhead Applied Manufacturing Overhead Incurred ase Inc. contains the following data. $32,640 ufacturing Overhead Incurred $31,650 Subsidiary data for Work in Process Inventory on June 1 are as follows. Job Cost Sheets Customer Job Cost Element Rodgers Stevens Direct materials $ 600 $ 800 Direct labor 320 540 Manufacturing overhead 400 675 $1,320 $2,015 Linton $ 900 580 725 $2,205 During June, raw materials purchased on account were $4,900, and all wages were paid. Additional overhead costs consisted of depreciation on equipment $900 and miscel- laneous costs of $400 incurred on account. A summary of materials requisition slips and time tickets for June shows the following. Customer Job Rodgers Koss Stevens Linton Rodgers Materiale oguisition Slips $ 800 2,000 500 1,300 300 4,900 1,500 $6,400 Time Tickets $ 850 800 360 1,200 390 3,600 1,200 $4,800 General use Overhead was charged to jobs at the same rate of $1.25 per dollar of direct labor co The patios for customers Rodgers, Stevens, and Linton were completed during June and sold for a total of $18,900. Each customer paid in full. Instructions (a) Journalize the June transactions: (1) for purchase of raw materials, factory labe incurred, and manufacturing overhead costs incurred; (2) assignment of direct labor, and overhead to production; and (3) completion of jobs and sale of aterials, factory labor costs od: (2) assignment of direct materials,

Answer 1

Solution

Case Inc

Journal Entries
Date	Account Titles and Explanation	Ref. No.	Debit	Credit
a.1	Raw Materials Inventory		$4,900
	Accounts Payable			4,900
	(To record purchase of raw materials)
	Factory Labor		$3,600
	Cash			$3,600
	(To record payment of direct wages)
	Manufacturing Overhead		$1,300
	Accumulated Depreciation – Equipment			$900
	Accounts Payable			$400
	(To record overhead costs incurred)
b. 1	Work in Process Inventory		$4,900
	Manufacturing Overhead		$1,500
	Raw Materials Inventory			$6,400
	(To record direct materials assigned to production)
	Work in Process Inventory		$3,600
	Manufacturing Overhead		$1,200
	Factory Labor			$4,800
	(To record labor cost)
	Work in Process Inventory		$4,500
	Manufacturing Overhead			$4,500
	(To record assignment of manufacturing overhead at 1.25 x $3,600 = $4,500)
c.	Finished Goods Inventory		$14,740
	Work in Process Inventory			$14,740
	(To record completion of jobs)
d.	Cash		$18,900
	Sales			$18,900
	(To record sale of jobs)
	Cost of Goods Sold		$14,740
	Finished Goods Inventory			$14,740
	(To record cost of goods sold)

Work in process inventory –

Work in process inventory account -
1-Jun	Balance	$5,540	30-Jun	Completed Job	$14,740
	Direct materials	$4,900
	Direct labor	$3,600
	Overhead applied	$4,500
30-Jun	Balance	3,800

Computations:
	Job	Direct Materials	Direct Labor	Manufacturing Overhead	Total Costs
	Rodgers	$1,700	$1,560	$1,950	$5,210
	Stevens	$1,300	$900	$1,125	$3,325
	Linton	$2,200	$1,780	$2,225	$6,205
					$14,740

Notes:

Direct materials –

For Job Rodgers = 800 + 600 + 300 = $1,700

For Job Stevens = 500 + 800 = $1,300

For Linton = 900 + 1,300 = $2,200

Direct Labor –

Rodgers – 320 + 850 + 390 = $1,560

Stevens = 540 + 360 = $900

Linton = 580 + 1,200 = $1,780

Manufacturing overhead –

Rodgers = 125% x 1,560 = $1,950

Stevens = 125% x 900 = $1,125

Linton = 125% x 1,780 = $2,225

Reconciliation of the balance in Work in Process Inventory with the cost of Unfinished Jobs:

Cost of unfinished job (Koss)

$3,800

Direct Materials

$2,000

Direct Labor

$800

Manufacturing overhead

$1,000

=

$3,800

Case Inc
Cost of Goods Manufactured Schedule
For the Month Ended June 30
Work in Process Inventory, June 1		$5,540
Direct materials used	$4,900
Direct labor	$3,600
Manufacturing overhead applied	$4,500
Total manufacturing costs		$13,000
Total cost of work in process		$18,540
Less: Work in process, June 30		$3,800
Cost of goods Manufactured		$14,740

Part 2 –

Agassi Company

1. Computation of predetermined overhead for each department –

Predetermined overhead rate = manufacturing overhead cost/allocation base

Department D –

Basis of allocation – direct labor cost

Manufacturing overhead cost = $1,200,000

Direct labor cost = $1,500,000

Predetermined overhead rate = 1,200,000/1,500,000 = 80%

Hence, predetermined manufacturing overhead is applied at 80% of direct labor cost.

Department E –

Basis of allocation - direct labor hours

Manufacturing overhead cost = $1,500,000

Direct labor hours = 125,000

Predetermined overhead rate = $1,500,000/125,000 = $12 per direct labor hour

Hence, predetermined overhead rate for department E is $12 per direct labor hour.

Department K –

Basis of allocation – Machine hours

Manufacturing overhead cost = $900,000

Machine hours = 120,000

Predetermined overhead rate = $900,000/120,000 = $7.50 per machine hour