Fundamental Accounting Principles -Hardcover
Fundamental Accounting Principles -Hardcover
22nd Edition
ISBN: 9780077862275
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 19, Problem 1APSA
To determine

Job Order Costing:

Job order costing is a system of allocating cost of production to an individual product or group of products. Under job order costing, each individual product or batches of products are treated as separate unit due to its unique features customize by the customers.

Product Cost:

The cost incurred on the production of a particular job or product is called product cost. The cost in production of a product usually involves raw material used, direct labor used and manufacturing overhead applied.

To determine:

1. Compute the total of each production cost incurred for April and the total cost assigned to each job.

2. Prepare journal entries for the month of April recording the production events and transactions.

3. Preparing a schedule of cost of goods manufactured.

4. Computation of gross profit and show how to present the inventories on the April 30 balance sheet.

Expert Solution & Answer
Check Mark

Answer to Problem 1APSA

Solution:

1.

  Job 306 Job 307 Job 308 Total
Production cost for April $262,500 $445,000 $257,500 $965,000
Total cost assigned to each job $321,500 $507,000 $257,500 $1,086,000

2. Journal entries to record the events and transactions

Events Accounts name Debit Credit
a. Raw Materials Inventory $500,000  
  Accounts Payable   $500,000
       
b. Work in Process Inventory $455,000  
  Raw Materials Inventory   $455,000
       
c.1 Factory Payroll $363,000  
  Cash   $363,000
       
c.2 Work in Process Inventory $340,000  
  Factory Payroll   $340,000
       
d. Factory Overhead $23,000  
  Factory Payroll   $23,000
       
e. Work in Process Inventory $170,000  
  Factory Overhead   $170,000
       
f.1 Factory Overhead $50,000  
  Raw Materials Inventory   $50,000
       
f.2 Factory overhead $32,000  
  Cash   $32,000
       
f.3 Factory overhead $19,000  
  Cash   $19,000
       
f.4 Factory overhead $51,000  
  Accumulated Depreciation – Factory Equipment   $51,000
       
g. Finished Goods Inventory $828,500  
  Work in Process Inventory   $828,500
       
h. Cost of Goods Sold $321,500  
  Finished Goods Inventory   $321,500
       
i. Cash $635,000  
  Sales   $635,000
       
j. Cost of Goods Sold $5,000  
  Factory Overhead   $5,000
       

3. Preparation of schedule of cost of goods manufactured

MARCELINO CO.
Schedule of Cost of Goods Manufactured
Direct materials used   $455,000
Direct labor cost   $340,000
Factory overhead:    
Indirect materials $50,000  
Indirect labor $23,000  
Factory rent $32,000  
Factory utilities $19,000  
Depreciation expense on factory equipment $51,000  
Total factory overhead   $175,000
     
Total manufacturing costs   $970,000
Add: Beginning Work in Process Inventory, March 31   $121,000
Total cost of Work in Process Inventory   $1,091,000
Less: Ending Work in Process Inventory, April 30   $(257,500)
Less: Under-applied overhead   $(5,000)
     
Cost of Goods Manufactured   $828,500

4.

Computation of Gross Profit
Sales $635,000
Less: Cost of Goods Sold $326,500
   
Gross Profit $308,500

Inventories on the balance sheet as on April 30

Inventories
Raw Materials Inventory $75,000
Work in Process Inventory $257,500
Finished Goods Inventory $507,000
Total Inventories $839,500

5.

Since the under-applied overhead is not material, the adjustment won’t impact the business decision making regarding individual jobs or batches of jobs. Hence it is closed to Cost of Goods Sold. The business decision regarding jobs or batches of jobs are made based on the information obtain from actual result. But if the over-underapplied overhead is material, it would affect the decision making and it would be allocated to Work in Process based on allocation used by the business.

Explanation of Solution

Explanation:

1.

Costs during April
  Job 306 Job 307 Job 308 Total
Direct Materials $135,000 $220,000 $100,000 $455,000
Direct Labor $85,000 $150,000 $105,000 $340,000
Applied Overhead $42,500 $75,000 $52,500 $170,000
         
Production cost incurred in April $262,500 $445,000 $257,500 $965,000
   
Balance on March 31  
Direct Materials $29,000 $35,000 - $64,000
Direct Labor $20,000 $18,000 - $38,000
Applied Overhead $10,000 $9,000 - $19,000
         
Total Cost Balance on March 31 $59,000 $62,000 - $121,000
         
Total cost assigned to each job $321,500 $507,000 $257,500 $1,086,000

2.

Factory Overhead
d. $23,000 e. $170,000
f.1 $50,000    
f.2 $32,000    
f.3 $19,000    
f.4 $51,000    
Under-applied $5,000    

4.

Raw Materials Inventory
Big. bal. $80,000 b. $455,000
a. $500,000 f.1 $50,000
Balance $75,000    
Work in Process Inventory
Big. bal. $121,000 g. $828,500
b. $455,000    
c.2 $340,000    
e $170,000    
Balance $257,500    
Finished Goods Inventory
g. $828,500 h. $321,500
Balance $500,700    
Cost of Goods Sold
h. $321,500    
j. $5,000    
Balance $215,700    
Conclusion

Conclusion:

It is concluded that the cost sheet helps in keeping accurate track of all cost incurred in the production of each individual product.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 19 Solutions

Fundamental Accounting Principles -Hardcover

Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY