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 $4,245,000 in manufacturing overhead cost at an activity level of 566,000 machine-hours. The company spent the entire month of January working on a large order for 12,600 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, $321,000 b, Raw materials used in production, $266,000(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, $63,700. e. Other manufacturing overhead costs incurred on account, $86,000 f. Manufacturing overhead cost was applied to production on the basis of 40,580 machine-hours actually worked during the month. g. The completed job for 12,600 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 direct 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 . 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?

Answer 1

Transaction	General Journal				Debit	Credit
a.	Raw materials inventory				321,000
	Accounts payable					321,000
b.	Work in process inventory				212800
	Manufacturing overhead				53200
	Raw materials inventory					266,000
c.	Work in process inventory				52,000
	Manufacturing overhead				104,000
	Factory wages payable					156,000
d.	manufacturing overhead				63,700
	Accumulated depreciation					63,700
e.	Manufacturing overhead				86,000
	Accounts paybale					86,000
f.	work in process inventory				304350
	manufacturing overhead					304,350
	(4,245,000/566,000)*40580
2)	Manufacturing overhead
	b.	53200	304350	f.
	c.	104,000
	d.	63,700
	e.	86,000
	end bal	2,550
	work in process
	b.	212800
	c.	52,000
	f.	304350
	end bal	569150
3)
g.	finished goods inventory				569150
	Work in process inventory					569150
4)	cost of goods sold
	unit cost	569150/12,600=		45.17
	hence cost of goods sold (45.17*10200)=				460740.5