MA15 Problem: Job Order Costing – Devoe Company

MA15 Problem: Job Order Costing – Devoe Company

The Devoe Company uses a job order costing system and started the 20x5 year with thefollowing inventory balances:Raw materials inventory

$160,000

Work-in-process inventory

87,000

Finished goods inventory

265,000

The following transactions took place during 20x5:1. Raw material purchases amounted to $450,000.2. Raw materials issued to production were as follows:Direct materials

$475,000

Indirect materials

20,000

3. Direct labour hours incurred amounted to 19,500 at an average rate of $30. The companyestimated total overhead to be $500,000 and direct labour hours incurred to be 20,000.The company allocates overhead on the basis of direct labour hours.4. Total manufacturing overhead (exluding indirect materials) incurred was $485,000.5. The work-in-process at December 31, 20x5 consisted of the following two jobs:Job A650Job A652

Direct materials

$45,000$26,500

Direct labour hours

560125

6. Ending finished goods inventory totalled $247,000.

 Required – 

a. Prepare journal entries to record the above transactions. b. Prepare a schedule of cost of goods manufactured and cost of goods sold.c. Prepare the journal entry to dispose of over/under applied overhead on the followingassumptions:i. the balance is written off against cost of goods sold, andii. the balance is prorated between the balances containing applied overhead?