Christopher’s Custom Cabinet Company uses a job order costsystem with overhead applied as a percentage of direct labor costs.Inventory balances at the beginning of 2016 follow:
|
| RawMaterials Inventory | $ | 15,700 |
| Work in ProcessInventory | | 6,700 |
| Finished GoodsInventory | | 21,300 |
|
The following transactions occurred during January:
(a) Purchased materials on account for $26,800.
(b) Issued materials to production totaling $21,000, 90percent of which was traced to specific jobs and the remainder ofwhich was treated as indirect materials.
(c) Payroll costs totaling $18,400 were recorded asfollows:
$10,100 for assembly workers
2,500 for factory supervision
2,700 for administrative personnel
3,100 for sales commissions
(d) Recorded depreciation: $5,000 for machines, $1,100 forthe copier used in the administrative office.
(e) Recorded $1,800 of expired insurance. Forty percentwas insurance on the manufacturing facility, with the remainderclassified as an administrative expense.
(f) Paid $5,600 in other factory costs in cash.
(g) Applied manufacturing overhead at a rate of 200percent of direct labor cost.
(h) Completed all jobs but one; the job cost sheet forthis job shows $2,200 for direct materials, $2,100 for directlabor, and $4,200 for applied overhead.
(i) Sold jobs costing $50,200. The revenue earned on thesejobs was $65,260.
Required:
1. Set up T-accounts, record the beginningbalances, post the January transactions, and compute the finalbalance for the following accounts: (Post all amountsseparately. Do not combine/add any dollar amounts when posting tothe t-accounts.)
- Raw Materials Inventory.
- Work in Process Inventory.
- Finished Goods Inventory.
- Cost of Goods Sold.
- Selling, General, and Administrative Expenses.
- Sales Revenue.
- Other accounts (Cash, Payables, etc.).
2. Determine how much gross profit the companywould report during the month of January beforeany adjustment is made for the overhead balance.
3. Determine the amount of over- or underappliedoverhead.
4. Compute adjusted gross profit assuming that anyover- or underapplied overhead balance is adjusted directly to Costof Goods Sold.
