Wiley Assigment Problem 201A Lott Company uses a job order c

Wiley Assigment Problem 20-1A

Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $20,000, direct labor $12,000, and manufacturing overhead $16,000. As of January 1, Job No. 49 had been completed at a cost of $90,000 and was part of finished goods inventory. There was a $15,000 balance in the Raw Materials Inventory account.

During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $122,000 and $158,000, respectively. The following additional events occurred during the month.

Problem 20-1A Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Job No. 50 was the only job in process. The costs Incurred prior to January 1 on this job were as follows: direct materials $20,000, direct labor $12,000, and manufacturing overhead $16,000. As of January 1, Job No. 49 had been completed at a cost of $90,000 and was part of finished goods inventory. There was a $15,000 balance in the Raw Materials Inventory account. During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $122,000 and $158,000,respectively. The following additional events occurred during the month 1. Purchased additional raw materials of $90,000 on account. 2. Incurred factory labor costs of $70,000. Of this amount $16,000 related to employer payroll taxes 3. Incurred manufacturing overhead costs as follows: indirect materials $17,000; indirect labor $20,000; depreciation expense on equipment $12,000; and various other manufacturing overhead costs on account $16,000 Assigned direct materials and direct labor to jobs as follows. 4. Job No Direct Materials Direct Labor 50 51 52 $10,000 39,000 30,000 $5,000 25,000 20,000

Solution

Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated direct labour cost Predetermined overhead rate = $840000/$700000 = 120% Journal Entries Job No.50 No. Account Titles and Explanation Debit Credit Date Direct Materials Direct Labour Manufacturing overhead 1 Raw Material Inventory $90,000 Beg. $20,000 $12,000 $16,000 Accounts Payable $90,000 Jan. $10,000 $5,000 $6,000 Total $30,000 $17,000 $22,000 2 Factory Labour Cost $70,000 Wages Payable $54,000 Cost of completed Job Payroll Taxes Payable $16,000 Direct Material $30,000 Direct Labour $17,000 3 Factory Overheads $65,000 Manufacturing Overhead $22,000 Raw Material Inventory $17,000 Total Cost $69,000 Factory Labour Cost $20,000 Accumulated Depreciation $12,000 Job No.51 Expense Payable $16,000 Date Direct Materials Direct Labour Manufacturing overhead Jan. $39,000 $25,000 $30,000 Journal Entries Total $39,000 $25,000 $30,000 No. Account Titles and Explanation Debit Credit 1 Work in process $79,000 Cost of completed Job Raw Material Inventory $79,000 Direct Material $39,000 Direct Labour $25,000 2 Work in process $50,000 Manufacturing Overhead $30,000 Factory Labour Cost $50,000 Total Cost $94,000 3 Work in process $60,000 Job No.52 Factory Overheads $60,000 Date Direct Materials Direct Labour Manufacturing overhead Jan. $30,000 $20,000 $24,000 Total $30,000 $20,000 $24,000 Journal Entries No. Account Titles and Explanation Debit Credit 1 Finished Goods inventory $163,000 Work In process $163,000 Journal Entries No. Account Titles and Explanation Debit Credit 1 Accounts Receivables $280,000 Sales $280,000 2 Cost of goods sold $159,000 Finished Goods Inventory $159,000 Finished Goods Inventory balance (Job No.51) $94,000 Manufacturing Overhead ($65000 - $60000) $5,000 Under-applied