Ciolino
Co.’s March 31 inventory of raw materials is $80,000. Raw materials purchases
in April are $500,000, and factory payroll cost in April is $363,000. Overhead
costs incurred in April are: indirect materials, $50,000; indirect labor,
$23,000; factory rent, $32,000; factory utilities, $19,000; and factory
equipment depreciation, $51,000. The predetermined overhead rate is 50% of
direct labor cost. Job 306 is sold for $635,000 cash in April. Costs of the
three jobs worked on in April follow.
Job 306 Job
307 Job 308
Balances
on March 31
Direct
materials ............ $
29,000 $ 35,000
Direct
labor ............... 20,000 18,000
Applied
overhead .......... 10,000 9,000
Costs
during April
Direct
materials ............ 135,000 220,000 $100,000
Direct
labor ............... 85,000 150,000 105,000
Applied
overhead .......... ? ? ?
Status
on April 30 ............ Finished
(sold) Finished (unsold) In process
Required
1.
Determine the total of each production cost incurred for April (direct labor, direct
materials, and applied overhead), and the total cost assigned to each job
(including the balances from March 31).
2.
Prepare journal entries for the month of April to record the following.
a.
Materials purchases (on credit), factory payroll (paid in cash), and actual
overhead costs including indirect materials and indirect labor. (Factory rent
and utilities are paid in cash.)
b.
Assignment of direct materials, direct labor, and applied overhead costs to the
Goods in Process Inventory.
c.
Transfer of Jobs 306 and 307 to the Finished Goods Inventory.
d.
Cost of goods sold for Job 306.
e.
Revenue from the sale of Job 306.
f.
Assignment of any underapplied or overapplied overhead to the Cost of Goods
Sold account. (The amount is not material.)
3.
Prepare a manufacturing statement for April (use a single line presentation for
direct materials and show the details of overhead cost).
4.
Compute gross profit for April. Show how to present the inventories on the
April 30 balance sheet.
Analysis
Component
5.
The over- or underapplied overhead is closed to Cost of Goods Sold. Discuss how
this adjustment impacts business decision making regarding individual jobs or
batches of jobs.
TUTORIAL PREVIEW
Problem 2-1A
Part 1
Total manufacturing
costs and the costs assigned to each job
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306
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307
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308
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April Total
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From March
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Direct materials
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$ 29,000
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$ 35,000
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Direct labor
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20,000
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18,000
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Applied overhead*
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10,000
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9,000
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