Nixon Company uses a job order cost system and applies overheadto production on the basis of direct laborcost. On January 1, 2014, Job No. 50 was the only jobin process. The costs incurred prior to January 1 on this job wereas follows: direct materials $25,000; direct labor $15,000; andmanufacturing overhead $20,000. Job No. 49 had been completed at acost of $85,000 and was part of finished goods inventory. There wasa $22,000 balance in the Raw Materials inventory account.
During themonth of January, the company began production on Jobs 51 and 52,and completed Jobs 50 and 51. Jobs 49 and 50 were sold on accountduring the month for $118,000 and $125,000, respectively. Thefollowing additional events occurred during the month.
1. Purchased additional raw materials of $200,000 onaccount.
2. Incurred factory labor costs of $41,000. Of this amount$11,000 is related to employer payroll taxes.
3. Incurred manufacturing overheadcosts as follows: indirect materials $3,000; indirect labor $12000;depreciation expense $19,000.
4. Assigned direct materials anddirect labor to jobs as follows.
JobNo. DirectMaterials Direct Labor
50 $8,000 $ 6,000
51 23,000 14,000
52 20,000 11,000
5. The company usesdirect labor cost as the activity base toassign overhead.
Instructions
(a) Calculate thepredetermined overhead rate for the year 2014, assuming Proctor& Gamble Company Manufacturing estimates total manufacturingoverhead costs of $750,000, direct labor costs of $200,000, anddirect labor hours of 25,000 for the year.
(b) Open job cost sheets for Jobs 50,51, and 52. Enter the January 1 balances on the job cost sheet forJob No. 50. (This can be done also when you get to parts d. ande.)
(c) Prepare the journal entries torecord the purchase of raw materials, the factory labor costsincurred, and the manufacturing overhead costs incurred during themonth of January.
(d) Prepare the journal entries torecord the assignment of direct materials, direct labor, andmanufacturing overhead costs to production. In assigningmanufacturing overhead costs, use the overhead rate calculated in(a). Post all costs to the job cost sheets as necessary.
(e) Total the job cost sheets for Job50 and Job 51 that were completed during the month. Prepare thejournal entry to record the completion of these jobs during themonth.
(f) Prepare the journal entries torecord the sale of Job 49 and Job 50 during the month.
(g) What is the balance in theWork in Process Inventory account at the end of the month?What does this balance consist of? (For example which Job and whatspecific costs.)
(h) What is the amount of over- orunderapplied overhead for the month?
Nixon Company uses a job order cost system and applies overheadto production on the basis of direct laborcost. On January 1, 2014, Job No. 50 was the only jobin process. The costs incurred prior to January 1 on this job wereas follows: direct materials $25,000; direct labor $15,000; andmanufacturing overhead $20,000. Job No. 49 had been completed at acost of $85,000 and was part of finished goods inventory. There wasa $22,000 balance in the Raw Materials inventory account.
During themonth of January, the company began production on Jobs 51 and 52,and completed Jobs 50 and 51. Jobs 49 and 50 were sold on accountduring the month for $118,000 and $125,000, respectively. Thefollowing additional events occurred during the month.
1. Purchased additional raw materials of $200,000 onaccount.
2. Incurred factory labor costs of $41,000. Of this amount$11,000 is related to employer payroll taxes.
3. Incurred manufacturing overheadcosts as follows: indirect materials $3,000; indirect labor $12000;depreciation expense $19,000.
4. Assigned direct materials anddirect labor to jobs as follows.
JobNo. DirectMaterials Direct Labor
50 $8,000 $ 6,000
51 23,000 14,000
52 20,000 11,000
5. The company usesdirect labor cost as the activity base toassign overhead.
Instructions
(a) Calculate thepredetermined overhead rate for the year 2014, assuming Proctor& Gamble Company Manufacturing estimates total manufacturingoverhead costs of $750,000, direct labor costs of $200,000, anddirect labor hours of 25,000 for the year.
(b) Open job cost sheets for Jobs 50,51, and 52. Enter the January 1 balances on the job cost sheet forJob No. 50. (This can be done also when you get to parts d. ande.)
(c) Prepare the journal entries torecord the purchase of raw materials, the factory labor costsincurred, and the manufacturing overhead costs incurred during themonth of January.
(d) Prepare the journal entries torecord the assignment of direct materials, direct labor, andmanufacturing overhead costs to production. In assigningmanufacturing overhead costs, use the overhead rate calculated in(a). Post all costs to the job cost sheets as necessary.
(e) Total the job cost sheets for Job50 and Job 51 that were completed during the month. Prepare thejournal entry to record the completion of these jobs during themonth.
(f) Prepare the journal entries torecord the sale of Job 49 and Job 50 during the month.
(g) What is the balance in theWork in Process Inventory account at the end of the month?What does this balance consist of? (For example which Job and whatspecific costs.)
(h) What is the amount of over- orunderapplied overhead for the month?
