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Examples of Job order costing [journals ]
Hogle company applies overhead cost to jobs on basis of machine hours worked. For the current year, the company estimated that it would work 75,000 hours and incur $450,000 in manufacturing overhead cost. The following transactions are recorded for the year
A. Raw materials were purchased on account, $410,000
B. Raw materials were requisitioned for use in production, $380,000 [360,000 direct materials and $20,000 indirect materials]
C. The following costs were incurred for employee services: direct labour,$75,000;nindirect labour, $110,000; sales commission, $90,000; and admin salaries $200,000
D. Sales travel costs were incurred,$17,000.
E. Utility costs [factory] =$43,000
F. Advertising cost incurred = $180,000
G. Depreciation was recorded for the year, $350,000 [80% for factory and 20% for selling & admin expenses]
H. Insurance for the year =$10,000 [70% for factory and the rest for selling and admin expenses]
I. Manufacturing overhead was applied to production. Company worked for 80,000 machine hours]
J. Goods costing $900,000 to manufacture were completed during the year
K. Goods costing $870,000 were sold for $1,500,000
REQUIRED
Journalize the items above
SOLUTION
|
|
DEBIT $ |
CREDIT $ |
|
A |
|
|
|
Raw materials |
410,000 |
|
|
Accounts payable |
|
410,000 |
|
B |
|
|
|
WIP |
360,000 |
|
|
Man / overhead |
20,000 |
|
|
Raw materials |
|
380,000 |
|
C |
|
|
|
WIP |
75,000 |
|
|
MO |
110,000 |
|
|
Sales / com expenses |
90,000 |
|
|
Admin salaries |
200,000 |
|
|
Salaries /wages payable |
|
475,000 |
|
D |
|
|
|
Sales travel expense |
17,000 |
|
|
Accounts payable |
|
17,000 |
|
E |
|
|
|
MO |
43,000 |
|
|
Accounts payable |
|
43,000 |
|
F |
|
|
|
Advertising expense |
180,000 |
|
|
Accounts payable |
|
180,000 |
|
G |
|
|
|
MO |
280,000 |
|
|
Depreciation expense |
70,000 |
|
|
Accumulated depreciation |
|
350,000 |
|
H |
|
|
|
MO |
7,000 |
|
|
Insurance expense |
3,000 |
|
|
Prepaid insurance |
|
10,000 |
I. Predetermined Rate = estimated MO/ estimated machine hours
= 450,000 / 75,000 = $6.00 per MH
Applied cost = 80,000 x 6.00 = $480,000
|
I |
|
|
|
WIP |
480,000 |
|
|
MO |
|
480,000 |
|
J |
|
|
|
Finished goods |
900,000 |
|
|
WIP |
|
900,000 |
|
K |
|
|
|
Accounts Receivable |
1,500,000 |
|
|
Sales |
|
1,500,000 |
|
COGS |
870,000 |
|
|
Finished Goods |
|