Problem 201A Lott Company uses a job order cost system and a

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 $23,600, direct labor $14,160, and manufacturing overhead $18,880. As of January 1, Job No. 49 had been completed at a cost of $106,200 and was part of finished goods inventory. There was a $17,700 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 $143,960 and $186,440, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $106,200 on account 2. Incurred factory labor costs of $82,600. Of this amount $18,880 related to employer payroll taxes 3. Incurred manufacturing overhead costs as follows: indirect materials $20,060; indirect labor $23,600; depreciation expense on equipment $14,160; and various other manufacturing overhead costs on account $18,880o Assigned direct materials and direct labor to jobs as follows. Job No. Direct Materials Direct Labor 50 51 52 $11,800 46,020 35,400 $5,900 29,500 23,600 Calculate the predetermined overhead rate for 2017, assuming Lott Company estimates total manufacturing overhead costs of $991,200, direct labor costs of $826,000, and direct labor hours of 23,600 for the year. (Round answer to the nearest whole percent, ee25%) Predetermined overhead rate

Solution

(a)     $991,200 ÷ $826,000 direct labor costs = 120% of direct labor costs

(b)     See solution to part (e) for job cost sheets

(c)      Raw Materials Inventory.....................................................................         106,200

                    Accounts Payable........................................................................                               106,200

          Factory Labor.......................................................................................           82,600

                    Factory Wages Payable..............................................................                                 63,720

                    Employer Payroll Taxes Payable..............................................                                 18,880

          Manufacturing Overhead....................................................................           76,700

                    Accounts Payable........................................................................                                 18,880

                    Accumulated Depreciation.........................................................                                 14,160

                    Raw Materials Inventory...........................................................                                 20,060

                    Factory Labor.............................................................................                                 23,600

(d)     Work in Process Inventory..................................................................           93,220

                    Raw Materials Inventory

                    ($11,800 + $46,020 + $35,400)................................................                                 93,220

          Work in Process Inventory..................................................................           59,000

                    Factory Labor ($5,900 + $29,500 + $23,600)...........................                                 59,000

          Work in Process Inventory..................................................................           70,800

                    Manufacturing Overhead

                    ($59,000 X 120% of direct labor costs).................................                                 70,800

          See solution to part (e) for postings to job cost sheets.

(e)                                                                      Job Cost Sheets

Job No. 50

Date

Direct Materials

Direct Labor

Manufacturing Overhead

Beg.

Jan.

$23,600

11,800

$35,400

$14,160

    5,900

$20,060

*$18,880*

*    7,080*

*$25,960*

Cost of completed job

          Direct materials..........................................................................................           $35,400

          Direct labor.................................................................................................           20,060

          Manufacturing overhead..........................................................................           25,960

Total cost...............................................................................................................           $81,420

           *$5,900 X 120%

Job No. 51

Date

Direct Materials

Direct Labor

Manufacturing Overhead

Jan.

$46,020

$46,020

$29,500

$29,500

**$35,400**

**$35,400**

Cost of completed job

          Direct materials..........................................................................................         $ 46,020

          Direct labor.................................................................................................           29,500

          Manufacturing overhead..........................................................................             35,400

Total cost...............................................................................................................         $110,920

           **$29,500 X 120%

Job No. 52

Date

Direct Materials

Direct Labor

Manufacturing Overhead

Jan.

$35,400

$23,600

***$28,320***

           ***$23,600 X 120%

Finished Goods Inventory.................................................................................... 192,340

                    Work in Process Inventory...........................................................................            192,340

                    ($81,420 + $110,920)

(f)      Accounts Receivable................................................................................... 330,400

                    Sales ($143,960 + $186,440)...........................................................................            330,400

         

          Cost of Goods Sold..................................................................................... 187,620

                    Finished Goods Inventory

                    ($106,200 + $81,420)..................................................................................            187,620

           

(g)

Finished

Goods Inventory

Beginning balance

Cost of completed jobs 50 and 51

106,200

192,340

187,620

Cost of jobs 49 and 50 sold

Ending balance

110,920

          The balance in this account consists of the cost of completed Job No. 51 which has not yet been sold.

(h)

Manufacturing Overhead

Actual

76,700

Applied

70,800

5,900

          The balance in the Manufacturing Overhead account is under applied.

Job No. 50

Date

Direct Materials

Direct Labor

Manufacturing Overhead

Beg. Jan.

$23,600 11,800 $35,400

$14,160     5,900 $20,060

*$18,880* *    7,080* *$25,960*

Cost of completed job           Direct materials..........................................................................................           $35,400           Direct labor.................................................................................................           20,060           Manufacturing overhead..........................................................................           25,960 Total cost...............................................................................................................           $81,420