Christophers Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of the current year follow:

Raw Materials Inventory$ 16,200Work in Process Inventory5,000Finished Goods Inventory21,200

The following transactions occurred during January:

1. Purchased materials on account for $27,100.
2. Issued materials to production totaling $21,800, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials.
3. Payroll costs totaling $16,800 were recorded as follows:

$11,500 for assembly workers

$1,200 for factory supervision

$1,300 for administrative personnel

$2,800 for sales commissions

1. Recorded depreciation: $5,700 for factory machines, $800 for the copier used in the administrative office.
2. Recorded $1,500 of expired insurance. Forty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense.
3. Paid $5,900 in other factory costs in cash.
4. Applied manufacturing overhead at a rate of 200 percent of direct labor cost.
5. Completed all jobs but one; the job cost sheet for the uncompleted job shows $2,300 for direct materials, $2,400 for direct labor, and $4,800 for applied overhead.
6. Sold jobs costing $50,100. The revenue earned on these jobs was $65,130.

Required:

1. Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts:
   1. Raw Materials Inventory.
   2. Work in Process Inventory.
   3. Finished Goods Inventory.
   4. Cost of Goods Sold.
   5. Manufacturing Overhead.
   6. Selling, General, and Administrative Expenses.
   7. Sales Revenue.
2. Determine how much gross profit the company would report during the month of January before any adjustment is made for the overhead balance.
3. Determine the amount of over- or underapplied overhead.
4. Compute adjusted gross profit assuming that any over- or underapplied overhead balance is adjusted directly to Cost of Goods Sold.

Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts: Note: Post all amounts separately. Do not combine/add any dollar amounts when posting to the T-accounts.

1. Raw Materials Inventory.
2. Work in Process Inventory.
3. Finished Goods Inventory.
4. Cost of Goods Sold.
5. Manufacturing Overhead.
6. Selling, General, and Administrative Expenses.
7. Sales Revenue.

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Raw Materials InventoryWork in Process InventoryDebitCreditDebitCreditBeginning Balance16,200Beginning Balance5,000(b)(h)(c)Ending Balance16,200(g)Ending Balance5,000Finished Goods InventoryCost of Goods SoldDebitCreditDebitCreditBeginning Balance21,200Beginning BalanceEnding Balance21,200Ending Balance0Manufacturing OverheadSelling, General, and Administrative ExpensesDebitCreditDebitCreditBeginning BalanceBeginning BalanceEnding Balance0Ending Balance0Sales RevenueDebitCreditBeginning BalanceEnding Balance0

• Determine how much gross profit the company would report during the month of January before any adjustment is made for the overhead balance.

Unadjusted Gross Profit

• Determine the amount of over- or underapplied overhead.

Manufacturing Overhead

• Required 2

Compute adjusted gross profit assuming that any over- or underapplied overhead balance is adjusted directly to Cost of Goods Sold.

Adjusted Gross Profit