Chapter 1, Problem 12E

Gerken Fabrication Inc. uses the job order cost system of accounting. The following information was taken from the company’s books after all posting had been completed at the end of March:

1. a. Compute the total production cost of each job.
2. b. Prepare the journal entries to charge the costs of materials, labor, and factory overhead to Work in Process.
3. c. Prepare the journal entry to transfer the cost of jobs completed to Finished Goods.
4. d. Compute the unit cost of each job.
5. e. Compute the selling price per unit for each job, assuming a mark-on percentage of 50%.

To determine

Calculate the total production cost for each job.

Explanation of Solution

Production costs are those costs that are incurred for manufacturing a product or providing the service to the end user.

Calculate the total production cost for each job.

Jobs Completed	Direct Materials Cost ($)	Direct Labor Cost ($)	Factory Overhead ($)	Total Production Cost ($)
1100	4,200	5,000	9,000	18,200
1200	3,700	4,500	7,800	16,000
1300	2,900	4,100	6,300	13,300
Total	10,800	13,600	23,100	47,500

Table (1)

Thus, the total value of production cost is $47,500.

To determine

Provide journal entry to charge the cost of materials, labor, and factory overhead to work-in process.

Explanation of Solution

Prepare journal entry to charge the cost of materials, labor, and factory overhead to work-in process.

Date	Accounts title and explanation	Debit ($)	Credit ($)
	Work in Process (Job 1100,1200, 1300)	10,800
	Materials		10,800
	(To record materials issued to Job 1100,1200, 1300)
	Work in Process (Job 1100,1200, 1300)	13,600
	Payroll		13,600
	(To record payment of wages to the labor involved in Job 1100,1200, 1300)
	Work in Process (Job 1100,1200, 1300)	23,100
	Factory Overhead		23,100
	(To record transfer of factory overhead to Work-in process in Job 1100,1200, 1300)

Table (2)

To determine

Provide journal entry for transfer the cost of job completed to finished goods.

Explanation of Solution

Prepare journal entry for transfer the cost of job completed to finished goods.

Date	Accounts title and explanation	Debit ($)	Credit ($)
	Finished Goods	47,500
	Work in Process (Job 1100,1200, 1300)		47,500
	(To record transfer of cost of job completed to finished goods)

Table (3)

To determine

Calculate the unit cost of each job.

Explanation of Solution

Calculate the unit cost of each job.

$\begin{array}{c}\text{Unit cost of Job 1100 = }\frac{\text{Total production cost of Job 1100}}{\text{Number}\text{of}\text{units}\text{completed}}\\ =\frac{\$18,200}{500}\\ =\$36.40\end{array}$

$\begin{array}{c}\text{Unit cost of Job 1200 = }\frac{\text{Total production cost of Job 1200}}{\text{Number}\text{of}\text{units}\text{completed}}\\ =\frac{\$16,000}{400}\\ =\$40.00\end{array}$

$\begin{array}{c}\text{Unit cost of Job 1300 = }\frac{\text{Total production cost of Job 1300}}{\text{Number}\text{of}\text{units}\text{completed}}\\ =\frac{\$13,300}{300}\\ =\$44.33\end{array}$

Hence, the unit cost of Job 1100, Job 1200, and Job 1300 is $36.40, $40.00, and $44.33 respectively.

To determine

Calculate the selling price per unit for each job, assuming that a mark-on percentage is 60%.

Explanation of Solution

Calculate the selling price per unit for Job 1100.

$\begin{array}{c}\text{Selling price per unit =}\left(\begin{array}{l}\text{Unit cost of Job 1100}\\ \times \text{Mark -on percentage}\end{array}\right)+\text{Unit cost of Job 1100}\\ =\left(\$36.40\times 50\%\right)+\$36.40\\ =\$18.20+\$36.40\\ =\$54.60\end{array}$

Calculate the selling price per unit for Job 1200.

$\begin{array}{c}\text{Selling price per unit =}\left(\begin{array}{l}\text{Unit cost of Job 1200}\\ \times \text{Mark -on percentage}\end{array}\right)+\text{Unit cost of Job 1200}\\ =\left(\$40.00\times 50\%\right)+\$40.00\\ =\$20.00+\$40.00\\ =\$60.00\end{array}$

Calculate the selling price per unit for Job 1300.

$\begin{array}{c}\text{Selling price per unit =}\left(\begin{array}{l}\text{Unit cost of Job 1300}\\ \times \text{Mark -on percentage}\end{array}\right)+\text{Unit cost of Job 1300}\\ =\left(\$44.33\times 50\%\right)+\$44.33\\ =\$22.17+\$44.33\\ =\$66.50\end{array}$

Hence, the selling price per unit for Job 1100, Job 1200, and Job 1300 is $54.60, $60.00, and $66.50 respectively.