SCHANTZ CORPORATION
SCHANTZ Corporation uses a job order cost system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor dollars. The estimated overhead for 2017 was $15,000. Estimated direct labor costs for 2017 are $10,000. The same predetermined rate was used in Year 2014.
There was no beginning balance, January 1, 2017, for direct materials and finished goods. Purchases of direct materials during the year totaled $9,000.
SCHANTZ had one job, Job 200, in process on January 1, 2017, with direct materials costs of $2,000 and direct labor costs of $3,000.
During 2017, direct materials and direct labor added to jobs were as follows:
Job 200 Job 201 Job 202
Direct materials --- $4,000 $1,000
Direct labor $1,000 5,000 2,000
Actual manufacturing overhead for 2017 was $15,000. During the year, SCHANTZ completed Jobs 200 and 201. Job 200 was sold for $20,000 cash.
REQUIRED:
1. Compute the January 1, 2017 beginning balance for Job 200.
2. Set up appropriate summary (control) accounts (e.g., work in process) and subsidiary ledger accounts for each of the three jobs.
3. Post any beginning balance and all 2017 dollar amounts to appropriate summary accounts and update the subsidiary ledger accounts.
4. Determine the 2017 ending inventory balances for each of the inventory accounts (i.e., direct material, work in process, and finished goods.
5. Calculate the amount of over or underapplied overhead for 2017. This amount is an adjustment to Cost of Goods Sold.
6. Compute the Adjusted Cost of Goods Sold for 2017.
7. Compute the Gross Margin for 2017.
SCHANTZ CORPORATION
SCHANTZ Corporation uses a job order cost system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor dollars. The estimated overhead for 2017 was $15,000. Estimated direct labor costs for 2017 are $10,000. The same predetermined rate was used in Year 2014.
There was no beginning balance, January 1, 2017, for direct materials and finished goods. Purchases of direct materials during the year totaled $9,000.
SCHANTZ had one job, Job 200, in process on January 1, 2017, with direct materials costs of $2,000 and direct labor costs of $3,000.
During 2017, direct materials and direct labor added to jobs were as follows:
Job 200 Job 201 Job 202
Direct materials --- $4,000 $1,000
Direct labor $1,000 5,000 2,000
Actual manufacturing overhead for 2017 was $15,000. During the year, SCHANTZ completed Jobs 200 and 201. Job 200 was sold for $20,000 cash.
REQUIRED:
1. Compute the January 1, 2017 beginning balance for Job 200.
2. Set up appropriate summary (control) accounts (e.g., work in process) and subsidiary ledger accounts for each of the three jobs.
3. Post any beginning balance and all 2017 dollar amounts to appropriate summary accounts and update the subsidiary ledger accounts.
4. Determine the 2017 ending inventory balances for each of the inventory accounts (i.e., direct material, work in process, and finished goods.
5. Calculate the amount of over or underapplied overhead for 2017. This amount is an adjustment to Cost of Goods Sold.
6. Compute the Adjusted Cost of Goods Sold for 2017.
7. Compute the Gross Margin for 2017.
Related questions
Pedriani Company uses a job order cost system and applies overhead to production on the basis of direct labor hours. On January 1, 2017, Job No. 25 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $10,000; direct labor $6,000; and manufacturing overhead $9,000. Job No. 23 had been completed at a cost of $42,000 and was part of finished goods inventory. There was a $5,000 balance in the Raw Materials Inventory account.
During the month of January, the company began production on Jobs 26 and 27, and completed Jobs 25 and 26. Jobs 23 and 25 were sold on account during the month for $63,000 and $74,000, respectively. The following additional events occurred during the month.
1. Purchased additional raw materials of $45,000 on account.
2. Incurred factory labor costs of $33,500. Of this amount, $7,500 related to employer
payroll taxes.
3. Incurred manufacturing overhead costs as follows: indirect materials $10,000;
indirect labor $9,500; depreciation expense on equipment $12,000; and various
other manufacturing overhead costs on account $11,000.
4. Assigned direct materials and direct labor to jobs as follows.
| Job No. | Direct Materials | Direct Labor |
| 25 | $ 5,000 | $ 3,000 |
| 26 | 17,000 | 12,000 |
| 27 | 13,000 | 9,000 |
5. The company uses direct labor hours as the activity base to assign overhead. Direct labor hours incurred on each job were as follows: Job No. 25, 200; Job No. 26, 800; and Job No. 27, 600.
Instructions
(a) Calculate the predetermined overhead rate for the year 2017, assuming Pedriani Company estimates total manufacturing overhead costs of $440,000, direct labor costs of $300,000, and direct labor hours of 20,000 for the year.
(b) Open job cost sheets for Jobs 25, 26, and 27. Enter the January 1 balances on the job cost sheet for Job No. 25.
(c) Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January.
(d) Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in (a). Post all costs to the job cost sheets as necessary.
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(e) Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry (or entries) to record the completion of any job(s) during the month.
(f) Prepare the journal entry (or entries) to record the sale of any job(s) during the month.
(g) What is the balance in the Work in Process Inventory account at the end of the month? What does this balance consist of?
(h) What is the amount of over- or underapplied overhead?
Prepare Job-Order Cost Sheets, Predetermined OverheadRate, Ending Balance of WIP, Finished Goods, and COGS
At the beginning of June, Rhone Company had two jobs in process,Job 44 and Job 45, with the following accumulated costinformation:
| Job 44 | Job 45 | |
| Direct materials | $5,100 | $1,500 |
| Direct labor | 1,200 | 3,000 |
| Applied overhead | 780 | 1,950 |
| Balance, June 1 | $7,080 | $6,450 |
During June, two more jobs (46 and 47) were started. Thefollowing direct materials and direct labor costs were added to thefour jobs during the month of June:
| Job 44 | Job 45 | Job 46 | Job 47 | |
| Direct materials | $2,500 | $7,110 | $1,800 | $1,700 |
| Direct labor | 800 | 6,400 | 900 | 560 |
At the end of June, Jobs 44, 45, and 47 were completed. Only Job45 was sold. On June 1, the balance in Finished Goods was zero.
| 1. | Calculate the overhead ratebased on direct labor cost. Round to three decimalplaces. | |||||||||||
| 2. | Prepare a brief job-order costsheet for the four jobs. Show the balance as of June 1 as well asdirect materials and direct labor added in June. Apply overhead tothe four jobs for the month of June, and show the endingbalances. | |||||||||||
| 3. | Calculate the ending balancesof Work in Process and Finished Goods as of June 30. | |||||||||||
| 4. | Calculate the Cost of Goods Sold for June. Refer to the list below for the exact wording of text itemswithin your job-order cost sheets.
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