38. LO.4 (Journal entries; cost accumulation) Stockman Co.

began 2010 with three

jobs in process:
TYPE OF COST
Job No. Direct Material Direct Labor Overhead Total
247 $ 77,200 $ 91,400 $ 36,560 $ 205,160
251 176,600 209,800 83,920 470,320
253 145,400 169,600 67,840 382,840
Totals $399,200 $470,800 $188,320 $1,058,320
During 2010, the following transactions occurred:
1. Th e fi rm purchased and paid for $542,000 of raw material.
2. Factory payroll records revealed the following:
• Indirect labor incurred was $54,000.
• Direct labor incurred was $602,800 and was associated with the jobs as
follows:
Job No. Direct Labor Cost
247 $ 17,400
251 8,800
253 21,000
254 136,600
255 145,000
256 94,600
257 179,400
3. Material requisition forms issued during the year revealed the following:
• Indirect material issued totaled $76,000.
• Direct material issued totaled $466,400 and was associated with jobs as follows:
Job No. Direct Material Cost
247 $ 12,400
251 6,200
253 16,800
254 105,200
255 119,800
256 72,800
257 133,200
4. Overhead is applied to jobs on the basis of direct labor cost. Management budgeted
overhead of $240,000 and total direct labor cost of $600,000 for 2010. Actual total
factory overhead costs (including indirect labor and indirect material) for the year
totaled $244,400.
5. Jobs #247 through #255 were completed and delivered to customers, who paid for
the goods in cash. Th e revenue on these jobs was $2,264,774.
a. Journalize all preceding events.
b. Determine the ending balances for the jobs still in process.
c. Determine the cost of jobs sold, adjusted for underapplied or overapplied
overhead.

Solution:

a. Raw Material Inventory 542,000

Cash 542,000

Manufacturing Overhead 54,000

Work in Process Inventory 602,800
Wages/Salaries Payable (or Cash) 656,800
 Manufacturing Overhead 76,000
Work in Process Inventory 466,400
Raw Material Inventory 542,400
Manufacturing Overhead 114,400
Various accounts 114,400
To record OH costs other than indirect labor and indirect
materials ($244,400 - $54,000 - $76,000)

Work in Process Inventory 241,120

Manufacturing Overhead 241,120
To apply OH at a rate of $.40 per DL$ (Job #247, $6,960;
#251, $3,520; #253, $8,400; #254, $54,640; #355,
$58,000;
#256, $37,840; and #257, $71,760)

Finished Goods Inventory 1,769,624

Work in Process Inventory
1,769,624
(See schedule below.)

Cash (or Accounts Receivable) 2,264,774

Sales 2,264,774

Cost of Goods Sold 1,769,624

Finished Goods Inventory 1,769,624

Schedule of Completed Jobs

Job Direct Material Direct Labor Applied OH Total
247 $ 89,600 $108,800 $ 41,692 $ 240,092
251 182,800 218,600 83,244 484,644
253 162,200 190,600 72,848 425,648
254 105,200 136,600 54,640 296,440
255 119,800 145,000 58,000 322,800
Totals $659,600 $799,600 $310,424 $1,769,624

b. Job Direct Material Direct Labor Applied OH Total

256 $ 72,800 $ 94,600 $ 37,840 $205,240
257 133,200 179,400 71,760 384,360
Totals $206,000 $274,000 $109,600 $589,600

c. Actual overhead $ 244,400

Applied overhead 241,120
Underapplied overhead 3,280
Unadjusted cost of jobs completed 1,769,624
Adjusted cost of jobs completed $1,772,904