T.A.

Mohamed Abbas
Accounting 402
Job Costing
Section (2)
Example (1): (4-1)

Destin Products uses a job-costing system with two direct-cost categories (direct materials and direct
manufacturing labor) and one manufacturing overhead cost pool. Destin allocates manufacturing
overhead costs using direct manufacturing labor costs. Destin provides the following information:

Budget for 2011 Actual Results for 2011

Direct Material Costs $2,000,000 $1,900,000
Direct Manufacturing Labor Costs 1,500,000 1,450,000
Manufacturing Overhead Costs 2,700,000 2,755,000

Required:
1. Compute the actual and budgeted manufacturing overhead rates for 2011.
2. During March, the job-cost record for Job 626 contained the following information:

- Direct Materials Used $40,000

- Direct Manufacturing Labor $30,000
Costs
Compute the cost of Job 626 using (a) actual costing and (b) normal costing.

3. At the end of 2011, compute the under- or overallocated manufacturing overhead under normal
costing. Why is there no under- or overallocated overhead under actual costing?

SOLUTION

Required (1): Compute the actual and budgeted manufacturing overhead rates for 2011.

𝐛𝐮𝐝𝐠𝐭𝐞𝐝 𝐌𝐚𝐧𝐮𝐟𝐚𝐜𝐭𝐮𝐫𝐢𝐧𝐠 𝐨𝐯𝐞𝐫𝐡𝐞𝐚𝐝 𝐜𝐨𝐬𝐭𝐬 $ 𝟐,𝟕𝟎𝟎,𝟎𝟎𝟎

Budgeted Manuf. Overhead Rate = = = 1.80 or 180%
𝐛𝐮𝐝𝐠𝐞𝐭𝐞𝐝 𝐃𝐢𝐫𝐞𝐜𝐭 𝐋𝐚𝐛𝐨𝐫 𝐂𝐨𝐬𝐭𝐬 $ 𝟏,𝟓𝟎𝟎,𝟎𝟎𝟎

𝐀𝐜𝐭𝐮𝐚𝐥 𝐌𝐚𝐧𝐮𝐟𝐚𝐜𝐭𝐮𝐫𝐢𝐧𝐠 𝐨𝐯𝐞𝐫𝐡𝐞𝐚𝐝 𝐜𝐨𝐬𝐭𝐬 $ 𝟐,𝟕𝟓𝟓,𝟎𝟎𝟎

Actual Manuf. Overhead Rate = = = 1.9 or 190%
𝐀𝐜𝐭𝐮𝐚𝐥 𝐃𝐢𝐫𝐞𝐜𝐭 𝐋𝐚𝐛𝐨𝐫 𝐂𝐨𝐬𝐭𝐬 $ 𝟏,𝟒𝟓𝟎,𝟎𝟎𝟎

Required (2): Compute the cost of Job 626 using (a) actual costing and (b) normal costing.

Cost of Job = Job’s D.M + D.L + Manuf. Overhead Costs

Actual Costing Normal Costing

Direct Material Costs $40,000 $40,000
(+) Direct Manufacturing Labor Costs 30,000 30,000
(1)
(+) Manufacturing Overhead Costs. 57,000 54,000
= Total Manufacturing Costs of Job 626 $127,000 $124,000

(1)
Actual = Actual D.L Cost x Actual Rate = $30,000 x 190% = $57,000
(1)
Normal = Actual D.L Cost x Budgeted Rate = $30,000 x 180% = $54,000

1
 Required (3): Compute the under- or overallocated manufacturing overhead under normal
costing. Why is there no under- or overallocated overhead under actual costing?

Over/Under Allocated Manuf. Overhead = Actual Manuf. Overhead – Allocated Manuf. Overhead

➢ Actual Manuf. Overhead = $2,755,000

➢ Allocated Manuf. Overhead = Actual Labor Cost x Budgeted Overhead Rate

= $1,450,000 x 1.80 = $2,610,000

Under Allocated Manuf. Overhead = $2,755,000 – $2,610,000 = $145,000

Why?

End of Example

2
 Example (2): (BE2-2)

During January, its first month of operations, Knox Company accumulated the following manufacturing

costs: raw materials $4,000 on account, factory labor $6,000 of which$5,200 relates to factory wages

payable and $800 relates to payroll taxes payable, and utilities payable $2,000.

Required:
Prepare separate journal entries for each type of manufacturing cost.

SOLUTION

Date Transactions Dr Cr
Jan. 31 • Direct Material Control. 4,000
▪ A/P Control. 4,000
Jan. 31 • Factory Labor. (as Expenses) 6,000
▪ Factory Wages Payable. 5,200
▪ Employee Payroll Taxes Payable. 800
Jan. 31 • Manufacturing Overhead Control. 2,000
▪ Utilities Payable. 2,000

End of Example
___________________________________________________________________________
Example (3): (BE2-6)

Marquis Company estimates that annual manufacturing overhead costs will be $900,000. Estimated
annual operating activity bases are direct labor cost $500,000, direct labor hours 50,000, and machine
hours 100,000.

Required:
Compute the predetermined overhead rate for each activity base.

SOLUTION
𝐌𝐚𝐧𝐮𝐟𝐚𝐜𝐭𝐮𝐫𝐢𝐧𝐠 𝐨𝐯𝐞𝐫𝐡𝐞𝐚𝐝 𝐜𝐨𝐬𝐭𝐬 $ 𝟗𝟎𝟎,𝟎𝟎𝟎
• Overhead Rate per Direct Labor Cost = = = 1.80 or 180%
𝐃𝐢𝐫𝐞𝐜𝐭 𝐋𝐚𝐛𝐨𝐫 𝐂𝐨𝐬𝐭𝐬 $ 𝟓𝟎𝟎,𝟎𝟎𝟎

𝐌𝐚𝐧𝐮𝐟𝐚𝐜𝐭𝐮𝐫𝐢𝐧𝐠 𝐨𝐯𝐞𝐫𝐡𝐞𝐚𝐝 𝐜𝐨𝐬𝐭𝐬 $ 𝟗𝟎𝟎,𝟎𝟎𝟎

• Overhead Rate per Direct Labor Hour = = = $18 per DL.hr.
𝐃𝐢𝐫𝐞𝐜𝐭 𝐋𝐚𝐛𝐨𝐫 𝐇𝐨𝐮𝐫𝐬 𝟓𝟎,𝟎𝟎𝟎 𝐇𝐫𝐬

𝐌𝐚𝐧𝐮𝐟𝐚𝐜𝐭𝐮𝐫𝐢𝐧𝐠 𝐨𝐯𝐞𝐫𝐡𝐞𝐚𝐝 𝐜𝐨𝐬𝐭𝐬 $ 𝟗𝟎𝟎,𝟎𝟎𝟎

• Overhead Rate per Machine Hours = = = $9 per Mhr.
𝐌𝐚𝐜𝐡𝐢𝐧𝐞 𝐇𝐨𝐮𝐫𝐬 𝟏𝟎𝟎,𝟎𝟎𝟎 𝐇𝐫𝐬

End of Example
___________________________________________________________________________

3
 Example (4): (BE2-8)

In March, Stinson Company completes Jobs 10 and 11. Job 10 cost $20,000 and Job 11 $30,000. On
March 31, Job 10 is sold to the customer for $35,000 in cash.

Required:
Journalize the entries for the completion of the two jobs and the sale of Job 10.

SOLUTION

Date Transactions Dr Cr
March. • Finished Goods Control. ($20,000 + $30,000) 50,000
31 ▪ WIP Control. 50,000
(To Record the Completion of Job 10 & 11)
March. • Cash. 35,000
31 ▪ Sales Revenues. 35,000
(To Record the Sale Price of Job 10)
March. • Cost of Goods Sold. 20,000
31 ▪ Finished Goods Control. 20,000
(To transfer the Cost of Job 10 to Cost of Goods Sold)

End of Example
___________________________________________________________________________
Example (5): (BE2-10)

At December 31, balances in Manufacturing Overhead are Sanchez Company debit $1,200, Garcia
Company credit $900. Prepare the adjusting entry for each company at December 31, assuming the
adjustment is made to cost of goods sold

Required:
Prepare adjusting entries for under- and overapplied overhead.

SOLUTION

IF: Manufacturing Overhead (Debit Balance): it means its under-stated.

Adjustment is to = Cost of Goods Sold

IF: Manufacturing Overhead (Credit Balance): it means its Over-stated.

Adjustment is to = Cost of Goods Sold

Date Transactions Dr Cr
Dec. 31 • Cost of Goods Sold. 1,200
▪ Manufacturing Overhead Control. 1,200
(To Adjust Sanchez Company Under-Stated Difference)
Dec. 31 • Manufacturing Overhead Control. 900
▪ Cost of Goods Sold. 900
(To Adjust Garcia Company Over-Stated Difference)

4
 Example (6): (E2-1)

The gross earnings of the factory workers for Vargas Company during the month of January are
$66,000. The employer’s payroll taxes for the factory payroll are $8,000. The fringe benefits to be
paid by the employer on this payroll are $6,000. Of the total accumulated cost of factory labor, 85%
is related to direct labor and 15% is attributable to indirect labor.

Required:
(a) Prepare the entry to record the factory labor costs for the month of January.
(b) Prepare the entry to assign factory labor to production

SOLUTION

No. Transactions Dr Cr
• Factory Labor. 80,000
(a) ▪ Factory Wages Payable. 66,000
▪ Employer Payroll Taxes Payable. 8,000
▪ Employer Fringe Benefits Payable. 6,000
• WIP Control. (80,000 x 85%) 68,000
(b) • Manufacturing Overhead Control. (Balance) 12,000
▪ Factory Labor. 80,000

___________________________________________________________________________
Example (7): (E2-2)

Stine Company uses a job order cost system. On May 1, the company has a balance in Work in Process
Inventory of $3,500 and two jobs in process: Job No. 429 $2,000, and Job No. 430 $1,500. During
May, a summary of source documents reveals the following.

Materials Labor
Job Number
Requisition Slips Time Tickets
429 $2,500 $1,900
430 3,500 3,000
431 4,400 $10,400 7,600 $12,500
General Use (Indirect) 800 1,200
$11,200 $13,700

Stine Company applies manufacturing overhead to jobs at an overhead rate of 60% of direct labor cost.
Job No. 429 is completed during the month.

Required:
(a) Prepare summary journal entries to record (i) the requisition slips, (ii) the time tickets, (iii) the
assignment of manufacturing overhead to jobs, and (iv) the completion of Job No. 429.

(b) Post the entries to Work in Process Inventory, and prove the agreement of the control account
with the job cost sheets. (Use a T-account.)

SOLUTION

5
 Required (a):

Date Transactions Dr Cr
May. 31 • WIP Control. 10,400
• Manufacturing Overhead Control. 800
▪ Direct Material Control. 11,200
(To Record the Requisition Slips)
May. 31 • WIP Control. 12,500
• Manufacturing Overhead Control. 1,200
▪ Factory Labor. 13,700
(To Record the Time Tickets)
May. 31 • WIP Control. ($12,500 x 60%) 7,500
▪ Manufacturing Overhead Allocated. 7,500
(Assignment of manufacturing overhead to jobs)
May. 31 • Finished Goods Control. [1] 7,540
▪ WIP Control. 7,540
(To Record the Completion of Job No. 429)

[1] Total Manufacturing Cost of Job No. 429:

➢ Beginning Balance. $2,000

➢ Direct Material. 2,500
➢ Direct Labor. 1,900
➢ Manuf. Overhead. ($1,900 x 60%) 1,140
$7,540

Required (b):

Dr. Work-In-Process Inventory Cr.

- May 1 Balance. 3,500 - May 31 7,540
- May 31 10,400
- May 31 12,500
- May 31 7,500
May 31 Balance $26,360

Job Cost Sheets

Job No. Beginning Work Direct Direct Manufacturing Total Cost
In Process Material Labor Overhead Of Jobs
430 $1,500 $ 3,500 $ 3,000 $ 1,800 (1) $ 9,800
431 0 $ 4,400 $ 7,600 $ 4,560 (2) $ 16,560
$ 26,360

Jobs’ Manufacturing Overhead Cost: (Job’s Direct Labor Cost x 60%)

(1)
Job (430) = $3,000 x 60% = $1,800
(2)
Job (431) = $7,600 x 60% = $4,560

Agreement of the account Control (T-Account) with Cost Sheet is Proven

6
 Example (8): (E2-3)

A job order cost sheet for Lowry Company is shown below.

Job No. 92 for 2,000 units

Date Direct Material Direct Labor Manufacturing Overhead
Beg. bal. Jan. 1 5,000 6,000 5,100
8 6,000 -- --
12 -- 8,000 6,400
25 2,000 -- --
27 -- 4,000 3,200
13,000 18,000 14,700
Cost of Completed Job
Direct Material $13,000
Direct Labor 18,000
Manuf. Overhead 14,700
Total Cost $45,700
Unit Cost ($45,700 ÷ 2,000 Units) $22.85

Required:
(a) On the basis of the foregoing data, answer the following questions:
1) What was the balance in Work in Process Inventory on January 1 if this was the only
unfinished job?

2) If manufacturing overhead is applied on the basis of direct labor cost, what overhead rate
was used in each year?

(b) Prepare summary entries at January 31 to record the current year’s transactions pertaining to
Job No. 92.
SOLUTION

Required (A):

(1) What was the balance in Work in Process Inventory on January 1 if this was the only
unfinished job?

• Direct Material $5,000

• Direct Labor 6,000
• Manufacturing Overhead 5,100
Work In Process Balance January 1 $16,100

(2) If manufacturing overhead is applied on the basis of direct labor cost, what overhead
rate was used in each year?

𝐌𝐚𝐧𝐮𝐟𝐚𝐜𝐭𝐮𝐫𝐢𝐧𝐠 𝐨𝐯𝐞𝐫𝐡𝐞𝐚𝐝 𝐜𝐨𝐬𝐭𝐬 $ 𝟏𝟒,𝟕𝟎𝟎

• Overhead Rate per Direct Labor Cost = = = 0.82 or 82%
𝐃𝐢𝐫𝐞𝐜𝐭 𝐋𝐚𝐛𝐨𝐫 𝐂𝐨𝐬𝐭𝐬 $ 𝟏𝟖,𝟎𝟎𝟎

7
 Required (b):

Date Transactions Dr Cr
Jan. 31 • WIP Control. 13,000
▪ Direct Material Control. 13,000
(Direct Material Used)
Jan. 31 • WIP Control. 18,000
▪ Factory Labor. 18,000
(Direct Labor)
Jan. 31 • WIP Control. 14,700
▪ Manufacturing Overhead Allocated. 14,700
(Manufacturing overhead)
Jan. 31 • Finished Goods Control. 45,700
▪ WIP Control. 45,700
(To Record the Completion of Job No. 92)

___________________________________________________________________________
Example (9): (E2-4)

Manufacturing cost data for Orlando Company, which uses a job order cost system, are presented
below.

Case A Case B Case C

• Direct Material Used. (a) $ 83,000 $ 63,150
• Direct Labor. $50,000 140,000 (h)
• Manufacturing Overhead Applied. 42,500 (d) (i)
Total Manufacturing Costs 145,650 (e) 213,000
• Work in Process 1/1/14 (b) 15,500 18,000
Total Cost of Work in Process 201,500 (f) (j)
• Work in Process 12/31/14 (c) 11,800 (k)
Cost of Goods Manufactured 192,300 (g) 222,000

Required:
Indicate the missing amount for each letter. Assume that in all cases manufacturing over- head is
applied on the basis of direct labor cost and the rate is the Same in all Cases.

We Can Calculate the missing Values Based on the following Statement:

Direct Material Used. xx

(+) Direct Labor. xx
(+) Manufacturing Overhead Applied. xx
= Total Manufacturing Costs xxx
(+) Work in Process 1/1/14 (Beg. Bal) xx
= Total Cost of Work in Process xxx
(-) Work in Process 12/31/14 (End. Bal) (xx)
= Cost of Goods Manufactured xxx

8
 SOLUTION

(a) Direct Material Used = Total Manufacturing Costs – Direct Labor – Manuf. Overhead

= $145,650 – $50,000 – $42,500 = $53,150

(b) Work in Process 1/1/14 = Total Cost of Work in Process – Total Manufacturing Costs

= $201,500 – $145,650 = $55,850

(c) Work in Process 12/31/14 = Total Cost of Work in Process – Cost of Goods Manufactured

= $201,500 – $192,300 = $9,200

(d) IF: Manuf. Overhead Rate is the same in all cases, So, by using the data of Case (A)

𝐌𝐚𝐧𝐮𝐟𝐚𝐜𝐭𝐮𝐫𝐢𝐧𝐠 𝐨𝐯𝐞𝐫𝐡𝐞𝐚𝐝 𝐜𝐨𝐬𝐭𝐬 $ 𝟒𝟐,𝟓𝟎𝟎

Manuf. Overhead Rate = = = 0.85 or 85%
𝐃𝐢𝐫𝐞𝐜𝐭 𝐋𝐚𝐛𝐨𝐫 𝐂𝐨𝐬𝐭𝐬 $ 𝟓𝟎,𝟎𝟎𝟎

Manufacturing Overhead Applied = Direct Labor Cost x Manuf. Overhead Rate

= $140,000 – 85% = $119,000

(e) Total Manufacturing Costs = Direct Material + Direct Labor + Manuf. Overhead

= $83,000 + $140,000 + $119,000 = $342,000

(f) Total Cost of Work in Process = Total Manufacturing Costs + Work in Process 1/1/14

= $342,000 + $15,500 = $357,500

(g) Cost of Goods Manufactured = Total Cost of Work in Process - Work in Process 12/31/14

= $357,500 - $11,800 = $345,700

IF: Direct Material + Direct Labor + Manuf. Overhead Cost = Total Manufacturing Cost
(h & I)
→ $63,150 + (h) + 0.85 (h) = $213,000

→ $63,150 + 1.85 (h) = $213,000

→ 1.85 (h) = $213,000 - $63,150

→ 1.85 (h) = $149,850

𝟏.𝟖𝟓 (𝐡) $ 𝟏𝟒𝟗,𝟖𝟓𝟎
→ =
𝟏.𝟖𝟓 𝟏.𝟖𝟓

(h) = $81,000

(I) = $81,000 x 85% = $68,850

(j) Total Cost of Work in Process = Total Manufacturing Costs + Work in Process 1/1/14

= $213,000 + $18,000 = $231,000

(k) Work in Process 12/31/14 = Total Cost of Work in Process – Cost of Goods Manufactured

= $231,000 – $222,000 = $9,000

End of Example

9
 Example (10): (4-1) Job costing, journal entries.

The University of Chicago Press is wholly owned by the university. It performs the bulk of its work for
other university departments, which pay as though the press were an out- side business enterprise.
The press also publishes and maintains a stock of books for general sale. The press uses normal costing
to cost each job. Its job-costing system has two direct-cost categories (direct materials and direct
manufacturing labor) and one indirect-cost pool (manufacturing overhead, allocated on the basis of
direct manufacturing labor costs).

The following data (in thousands) pertain to 2011:

• Direct materials and supplies purchased on credit. $ 800

• Direct materials used 710
• Indirect materials issued to various production departments 100
• Direct manufacturing labor 1,300
• Indirect manufacturing labor incurred by various production departments. 900
• Depreciation on building and manufacturing equipment 400
• Miscellaneous manufacturing overhead* incurred by various production
departments (ordinarily would be detailed as repairs, photocopying, utilities, 550
etc.)
• Manufacturing overhead allocated at 160% of direct manufacturing labor costs. ?
• Cost of goods manufactured 4,120
• Revenues 8,000
• Cost of goods sold (before adjustment for under- or overallocated
manufacturing overhead) 4,020
• Inventories, December 31, 2010 (not 2011):
➢ Materials Control 100
➢ Work-in-Process Control 60
• Finished Goods Control. 500

Required:
1. Prepare an overview diagram of the job-costing system at the University of Chicago Press.

2. Prepare journal entries to summarize the 2011 transactions. As your final entry, dispose of the
year-end under- or overallocated manufacturing overhead as a write-off to Cost of Goods Sold.
Number your entries. Explanations for each entry may be omitted.

3. Show posted T-accounts for all inventories, Cost of Goods Sold, Manufacturing Overhead
Control, and Manufacturing Overhead Allocated.

10
 SOLUTION

Required (1):

Indirect Cost Manufacturing Overhead

Pool

Direct Manufacturing
Cost Allocation Labor Cost
Base

Cost Object: Indirect Costs

Print Job
Direct Costs

Direct Direct
Direct Costs Materia Lborl
l

11
 Required (2):

No. Transactions Dr Cr
1 • Direct Material Control. 800
▪ A/P Control. 800
(Direct Material & Supplies Purchased on Credit)
2 • WIP Control. 710
▪ Direct Material Control. 710
(Direct Material Used)
3 • Manufacturing Overhead Control. 100
▪ Direct Material Control. 100
(Indirect Materials issued to Production Department)
4 • WIP Control. (Direct Labor) 1,300
• Manufacturing Overhead Control. (Indirect Labor) 900
▪ Wages Payable Control. 2,200
(Direct & Indirect Labor Incurred)
5 • Manufacturing Overhead Control. 400
▪ Accumulated Depreciation – Building & Equipment. 400
(Depreciation on Building & Manufacturing Equipment)
6 • Manufacturing Overhead Control. 550
▪ Miscellaneous Accounts. 550
(Manufacturing overhead)
7 • WIP Control. 2,080
▪ Manufacturing Overhead Allocated. 2,080
($1,300 x 160% = $2,080)
8 • Finished Goods Control. 4,120
▪ Work In Process Inventory. 4,120
(Cost of Goods Manufactured)
9 • A/R control or Cash. 8,000
▪ Revenues. 8,000
(Revenues)
10 • Cost of Goods Sold. 4,020
▪ Finished Goods Control. 4,020
(Cost of goods Sold before Adjusting Allocation difference)
11 • Manufacturing Overhead Allocated. (Close) 2,080
▪ Manufacturing Overhead Control. (Close) 1,950
▪ Cost of Goods Sold. (Adjusting the difference) 130
(Adjusting the Allocation difference from Cost of Goods Sold)

12
Required (3):
Dr. Direct Material Control Cr.
▪ Balance. 1/1/2011 100 (2) WIP Control
(Material Used) 710
(1) A/P Control. (Purchases) 800
(3) Manufacturing Overhead
Control. (Material Used) 100
Balance 21/31/2011 90

Dr. Work-In-Process Control Cr.

▪ Balance. 1/1/2011 60 (8) Finished Goods Control.
(Goods Completed) 4,120
(2) Material Control.
(Direct Material) 710

(4) Wages Payable Control.

(Direct Manuf. Labor) 1,300

(7) Manuf. Overhead

Allocated. 2,080
Balance 21/31/2011 30

Dr. Finished Goods Control Cr.

▪ Balance. 1/1/2011 500 (10) Cost of Goods Sold. 4,020

(8) WIP Control.

(Goods Completed) 4,120
Balance 21/31/2011 600

Dr. Cost of Goods Sold Cr.

(10) Finished Goods Control. (11) Manuf. Overhead
(Goods Sold) 4,020 Allocated.
(Adjust for Over-Allocation) 130
Balance 21/31/2011 3,890

Dr. Manufacturing Overhead Control Cr.

(3) Material Control. (11) To Close. 1,950
(Indirect Material) 100

(4) Wages Payable Control.

(Indirect Manuf. Labor) 900

(5) Acc. Depreciation Control.

(Depreciation) 400

(6) A/P Control.

(Miscellaneous) 550
Balance -0-

Dr. Manufacturing Overhead Allocated Cr.

(11) To Close. 2,080 (7) WIP Control.
(Manuf. Overhead Allocated) 2,080
Balance -0-

End of Example

13
 Example (11): (4-25)

Production Company produces gadgets for the coveted small appliance market. The following data
reflect activity for the year 2011:

▪ Purchases of direct materials (net) on credit $122,000

▪ Direct manufacturing labor cost 83,000
▪ Indirect labor 54,000
▪ Depreciation, factory equipment 32,000
▪ Depreciation, office equipment (Not Manufacturing) 7,900
▪ Maintenance, factory equipment 29,000
▪ Miscellaneous factory overhead 9,900
▪ Rent, factory building 78,000
▪ Advertising expense 94,000
▪ Sales commissions 33,000
Inventories:
January 1, 2011 December 31, 2011
Direct Materials $9,800 $13,000
Work in Process 6,300 23,000
Finished Goods 68,000 27,000

Production Co. uses a normal costing system and allocates overhead to work in process at a rate of
$2.60 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no
inventory account for indirect materials

Required:
1. Prepare journal entries to record the transactions for 2011 including an entry to close out over-
or under-allocated overhead to cost of goods sold. For each journal entry indicate the source
document that would be used to authorize each entry. Also note which subsidiary ledger, if any,
should be referenced as backup for the entry.

2. Post the journal entries to T-accounts for all of the inventories, Cost of Goods Sold, the
Manufacturing Overhead Control Account, and the Manufacturing Overhead Allocated Account.

SOLUTION

14
 Required (1):

No. Transactions Dr Cr
1 • Direct Material Control. 122,000
▪ A/P Control. 122,000
(To record purchase of direct material on account)
2 • WIP Control. 118,800
1
▪ Direct Material Control. 118,800
(To transfer the direct materials to work in process)
3 • WIP Control. 83,000
• Manufacturing Overhead Control. 54,000
▪ Wages Payable Control. 137,000
(To record direct & Indirect Labor Cost)
4 • Manufacturing Overhead Control. 148,900
▪ Salaries Payable Control. 29,000
▪ A/P Control. 9,900
▪ Accumulated Depreciation Control. 32,000
▪ Rent Payable Control. 78,000
(To Record Indirect Manufacturing Costs)
5 • WIP Control. ($83,000 x $2.60) 215,800
▪ Manufacturing Overhead Allocated. 215,800
(To transfer Manuf. Overhead Allocated to WIP Control)
6 • Finished Goods Control. 400,900
2
▪ WIP Control. 400,900
(To transfer WIP to Finished Goods Control)
7 • Cost of Goods Sold. 441,900
▪ Finished Goods Control. 3 441,900
(To record Cost of Goods Sold)
8 • Manufacturing Overhead Allocated. (Close) 215,800
▪ Manufacturing Overhead Control. (Close) 202,900
▪ Cost of Goods Sold. (Adjusting the difference) 12,900
(Adjusting the Allocation difference from Cost of Goods Sold)
9 • Administrative Expenses. 7,900
• Marketing Expenses. ($33,000 + $94,000) 127,000
▪ Accumulated Depreciation Control. 7,900
▪ Salaries Payable. 33,000
▪ A/P Control. 94,000
(To record Administrative & Marketing expenses)

1 Direct Material Used = DM beg. inventory + DM Purchased - DM end. inventory

= $9,800 + $122,000 - $13,000 = $118,800

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2 Cost of Goods Manufactured:
= WIP beg. Inventory + Manufacturing Costs – WIP end. inventory

= WIP beg. Inventory + (D. Material + D. Labor + Manuf. Overhead Allocated) – WIP end. inventory

= $6,300 + ($118,800 + $83,000 + $215,800) – $23,000 = $400,900

3 Cost of Goods Sold = FG beg. inventory + Cost of Goods Manufactured - FG end. inventory
= $68,000 + $400,900 – $27,000 = $441,900

Required (2):

Dr. Direct Material Control Cr.

▪ Balance. 1/1/2011 9,800 (2) WIP Control
(Material Used) 118,800
(1) A/P Control. (Purchases) 122,000

Balance 21/31/2011 13,000

Dr. Work-In-Process Control Cr.

▪ Balance. 1/1/2011 6,300 (6) Finished Goods Control.
(Goods Completed) 400,900
(2) Material Control.
(Direct Material) 118,800

(3) Wages Payable Control.

(Direct Manuf. Labor) 83,000

(5) Manuf. Overhead

Allocated. 215,800
Balance 21/31/2011 23,000

Dr. Finished Goods Control Cr.

▪ Balance. 1/1/2011 68,000 (7) Cost of Goods Sold. 441,900

(6) WIP Control.

(Goods Completed) 400,900
Balance 21/31/2011 27,000

Dr. Cost of Goods Sold Cr.

(7) Finished Goods Control. (8) Manuf. Overhead
(Goods Sold) 441,900 Allocated.
(Adjust for Over-Allocation) 12,900

Balance 21/31/2011 429,000

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Dr. Manufacturing Overhead Control Cr.
(3) Material Control. (8) To Close. 202,900
(Indirect Manuf. Labor) 54,000

(4) Salaries Payable. (Maintenance) 29,000

A/P Control. (Miscellaneous) 9,900
Acc. Depreciation Control. 32,000
Rent Payable Control. 78,000

Balance -0-

Dr. Manufacturing Overhead Allocated Cr.

(8) To Close. 215,800 (5) WIP Control.
(Manuf. Overhead Allocated) 215,800

Balance -0-

End of Example

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