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 $16,400 6 ,000 20,700 The following transactions occurred during January: (a) Purchased materials on account for $27,500. (b) 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 $17,900 were recorded as follows: $10,600 for assembly workers 2,400 for factory supervision 2,700 for administrative personnel 2,200 for sales commissions (d) Recorded depreciation: $5,500 for factory machines, $900 for the copier used in the administrative office. (e) Recorded $1,900 of expired insurance. Forty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense. (f) Paid $6,300 in other factory costs in cash. (g) Applied manufacturing overhead at a rate of 200 percent of direct labor cost. (h) Completed all jobs but one; the job cost sheet for the uncompleted job shows $2,600 for direct materials, $2,000 for direct labor, and $4,000 for applied overhead. (1) Sold jobs costing $52,000. The revenue earned on these jobs was $67,600.

Answer 1

1.

Raw Materials Inventory					Work in Process Inventory
Beg. Bal.	16400				Beg. Bal.	6000
(a)	27500	21000	(b)		(b)	18900
					(c)	10600
End. Bal.	22900				(g)	21200	48100	(h)
					End. Bal.	8600
Finished Goods Inventory					Cost of Goods Sold
Beg. Bal.	20700				(i)	52000
(h)	48100	52000	(i)
End. Bal.	16800				End. Bal.	52000
Manufacturing Overhead					Selling, General, Administrative Exp.
Beg. Bal.					Beg. Bal.
(b)	2100				(c)	2700
(c)	2400				(c)	2200
(d)	5500				(d)	900
(e)	760				(e)	1140
(f)	6300	21200	(g)
					End. Bal.	6940
End. Bal.		4140
Sales Revenue
Beg. Bal.
		67600	(i)
End. Bal.		67600

2. Unadjusted gross profit = Sales revenue - Cost of goods sold = $67600 - $52000 = $15600

3. Manufacturing overhead $4140 overapplied

Actual overheads incurred $17060 - Overheads applied $21200 = Overapplied overheads $4140

4. Adjusted gross profit = Sales revenue - Adjusted cost of goods sold = $67600 - $47860 = $19740

Adjusted cost of goods sold = $52000 - $4140 = $47860