Exercise On April 1 Rowand Company is working on two jobs A

Exercise:

On April 1, Rowand Company is working on two jobs, A and B. Job A contains 1000 units and Job B contains 500 units.

The cost sheet shows $30,000 balance in job A, where job B has $0 balance on April 1.

The company used to apply overhead on the basis of direct labor costs. The company estimates annual overhead costs will be $792,000, and annual direct labor costs will be $900,000.

At the beginning of April, the company had $7,000 in raw materials on hand. During the month, the company purchased $60,000 raw materials.

During April, $52,000 in raw materials were requisitioned from the storeroom for use in production. These raw materials include $50,000 direct materials, and 2,000 indirect materials were applied. (Of these direct raw materials, $28,000 was issued for job A and $22,000 for job B).

April’s payroll sheets show $55,000 wages payable and $20,000 relates to payroll taxes payable.

Various time tickets show that $60,000 direct labor ($42,000 job A and $18,000 job B), and $15,000 indirect labor were assigned.

Expenses during Aprils were as follows:

            Utilities (heat, water, and power)      $41,000

            Rent on factory equipment                 31,200

            Miscellaneous factory costs                   5,800

            Total                                                    $78,000

Job A was completed at the end of April and shipped to the customer for total sales revenue of $225,000.

Required:

Prepare journal entries to record the preceding transactions and post to the proper account.

Show the job cost sheet for each job.

Prepare the cost of manufacturing schedule and the income statement at the end of April.

Solution

Working note

Overhead for Job A =95000x(42000/60000)