The Fielder manufacturing company uses job order costing system. The company uses machine hours to apply overhead cost to jobs. At the beginning of 2020, the company estimated that 7,850 machine hours would be worked and $1,256,000 overhead cost would be incurred during 2020. The following activities took place in the work in process inventory during February: WIP Inventory A/C Debit - February 1 Bal. b/f 51,250 Debit- Direct Materials Used 256,400 Other transactions incurred: - Indirect material issued to production was $38,000 - Total manufacturing labour incurred in February was $345,000, 80% of this amount represented direct labour. - Other manufacturing overhead costs incurred for February amounted to $340,750. - Two jobs were completed with total costs of $324,000 & $240,000 respectively. They were sold on account at a margin of 40% on sales. Required: 1) State the journal entries necessary to record the above transactions in the general journal: a) For direct materials used in February b) For indirect material issued to production in February c) For total manufacturing labour incurred in February d) To assign manufacturing labour to the appropriate accounts e) For other manufacturing overhead incurred f) For manufacturing overhead applied to production for February, given that Fine manufacturing company worked 2,750 machine hours. g) To move the completed jobs into finished goods inventory h) To sell the two completed jobs on account 2) Calculate the gross profit earned by Fielder. 3) Determine the balance in work in process inventory on February 29.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
The Fielder manufacturing company uses job order costing system. The company uses
machine hours to apply
estimated that 7,850 machine hours would be worked and $1,256,000 overhead cost would
be incurred during 2020.
The following activities took place in the work in process inventory during February:
WIP Inventory A/C
Debit - February 1 Bal. b/f 51,250
Debit- Direct Materials Used 256,400
Other transactions incurred:
- Indirect material issued to production was $38,000
- Total manufacturing labour incurred in February was $345,000, 80% of this amount
represented direct labour.
- Other
- Two jobs were completed with total costs of $324,000 & $240,000 respectively. They
were sold on account at a margin of 40% on sales.
Required:
1) State the
journal:
a) For direct materials used in February
b) For indirect material issued to production in February
c) For total manufacturing labour incurred in February
d) To assign manufacturing labour to the appropriate accounts
e) For other manufacturing overhead incurred
f) For manufacturing overhead applied to production for February, given that Fine
manufacturing company worked 2,750 machine hours.
g) To move the completed jobs into finished goods inventory
h) To sell the two completed jobs on account
2) Calculate the gross profit earned by Fielder.
3) Determine the balance in work in process inventory on February 29.
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