The Cost Cycle & Normal Job Order Cost System

Pr3-6
Assets = Liabilities + Shareholder's Equity
Current Current Capital Income Statement
Direct Materials Work In Process Finished Goods Vouchers Payable Common Shares Retained Earnings Sales Cost of Sales
Bi Bi Bi
Add dm Add
Gap dl gas
Ei foh Ei
cpc
tcpc
Ei
Prepaid Expenses Accrued Payroll Factory O'h Control

Proration of over applied FOH

Ei WIP
Ei FG
COS

Long Term Bal

Allowance for Depr Job Order Sub Ledger
Job Order Direct Material Direct Labour Factory Overhead Total
Number $ Hours S Hours $ Costs $
215 0
0
EI WIP
0
0
Total 0 0 0 0 0

0
 The Cost Cycle & Normal Job Order Cost System
Pr3-6
Assets =
Liabilities + Shareholder's Equity
Current Current Capital Income Statement
Direct Materials Work In Process Finished Goods Vouchers Payable Common Shares Retained Earnings Sales Cost of Sales
Bi 80,000 Bi 70,000 Bi 400,000 1,461,000 3. 510,000 1. 3. 1,461,000
Add 1. 510,000 570,000 dm 570,000 1,321,000 2. Add 1,321,000
Gap 590,000 dl 90,000 gas 1,721,000 1,461,000
Ei 20,000 foh 1.b 741,000 Ei 260,000
cpc 1,401,000
tcpc 1,471,000
Ei 150,000
Prepaid Expenses Accrued Payroll Factory O'h Control
POHR 1.a N $650,000 = 130.00% 90,000 i/l 170,000 741,000 1.b
D $500,000 or 1.3 Proration of over applied FOH prop tax 48000
Ei WIP depr 260,000
Ei FG mtnce 95,000
COS ins 7,000
rent 180,000
760,000
Long Term Under bal 19,000 1.b
Allowance for Depr Job Order Sub Ledger Applied
Job Order Direct Material Direct Labour Factory Overhead Total
Number $ Hours S Hours $ Costs $
4. 215 8,500 2,700 11,050 22,250
0
5. EI WIP 48,000 39,600 62,400 150,000 150,000
0
0
Total 0

SP $31,150 22,250
4.
 Problem 3-6 (75 minutes) (LO3 – CC5; LO6 – CC13; LO7 – CC14)

1 a. ESTIMATED OVERHEAD COST $650,000 = 130.00%

ESTIMATED DIRECT MATERIALS USE $500,000

b. Before the under- or overapplied overhead can be computed, we must

determine the amount of direct materials used in production for the year.

Raw materials inventory, beginning $ 80,000

Add, Purchases of raw materials  510,000
Raw materials available $590,000
Deduct: Raw materials inventory, ending    20,000
Raw materials used in production $570,000

Since no indirect materials are identified in the problem, these would all be
direct materials. With this figure, we can proceed as follows:

Actual manufacturing overhead costs:

Indirect labour $170,000
Property taxes 48,000
Depreciation of equipment 260,000
Maintenance 95,000
Insurance 7,000
Rent, building  180,000
Total actual costs $760,000
Applied manufacturing overhead costs:  741,000
$570,000 × 130%
Underapplied overhead $19,000

2 GITANO PRODUCTS
Schedule of Cost of Goods Manufactured

Direct materials:
Raw materials inventory, beginning $ 80,000
Add purchases of raw materials  510,000
Total raw materials available 590,000
Deduct raw materials inventory, ending    20,000
Raw materials used in production $   570,000
Direct labour 90,000
Manufacturing overhead applied to work in process     741,000
Total manufacturing costs $1,401,000
Add: Work in process, beginning     70,000
$1,471,000
Deduct: Work in process, ending       150,000
Cost of goods manufactured $1,321,000

3 Cost of goods sold:

Finished goods inventory, beginning $  400,000
Add cost of goods manufactured  1,321,000
Goods available for sale $1,721,000
Deduct finished goods inventory, ending     260,000
 Cost of goods sold $1,461,000

4 Direct materials $ 8,500

Direct labour 2,700.0
Overhead applied ($8,500 × 130%)  11,050
Total manufacturing cost $22,250

$22,250 × 140% = $31,150 price to the customer.

5 The amount of overhead cost in Work in Process would be:

$48,000 direct materials cost × 130% = $62,400.

The amount of direct labour cost in Work in Process would be:

Total ending work in process $150,000

Deduct: Direct materials $48,000
Manufacturing overhead  62,400 110,400
Direct labour cost $39,600

The completed schedule of costs in Work in Process would be:

Direct materials $48,000

Direct labour 39,600
Manufacturing overhead  62,400
Total Work in Process $150,000
 Problem 3-6 (75 minutes) (LO3 – CC5; LO6 – CC13; LO7 – CC14)pg113

1 a. ESTIMATED OVERHEAD COST =

ESTIMATED DIRECT MATERIALS USED

b. Before the under- or overapplied overhead can be computed, we must

determine the amount of direct materials used in production for the year.

Raw materials inventory, beginning

Add, Purchases of raw materials
Raw materials available
Deduct: Raw materials inventory, ending
Raw materials used in production

Since no indirect materials are identified in the problem, these would all be
direct materials. With this figure, we can proceed as follows:

Actual manufacturing overhead costs:

Indirect labour
Property taxes
Depreciation of equipment
Maintenance
Insurance
Rent, building
Total actual costs
Applied manufacturing overhead costs:
$570,000 × 130%
Underapplied overhead

2 GITANO PRODUCTS
Schedule of Cost of Goods Manufactured

Direct materials:
Raw materials inventory, beginning
Add purchases of raw materials
Total raw materials available
Deduct raw materials inventory, ending
Raw materials used in production
Direct labour
Manufacturing overhead applied to work in process
Total manufacturing costs
Add: Work in process, beginning

Deduct: Work in process, ending

Cost of goods manufactured

3 Cost of goods sold:

Finished goods inventory, beginning
Add cost of goods manufactured
Goods available for sale
Deduct finished goods inventory, ending
 Cost of goods sold

4 Direct materials
Direct labour
Overhead applied ($8,500 × 130%)
Total manufacturing cost

× =$ price to the customer.

5 The amount of overhead cost in Work in Process would be:

direct materials cost × =$ .

The amount of direct labour cost in Work in Process would be:

Total ending work in process

Deduct: Direct materials
Manufacturing overhead
Direct labour cost

The completed schedule of costs in Work in Process would be:

Direct materials
Direct labour
Manufacturing overhead
Total Work in Process