Chapter 15: Q15QS (page 696)
Refer to this chapter’s Global View. Porsche AG is the manufacturer of the Porsche automobile line. Does Porsche produce in jobs or in job lots? Explain.
Porsche AG willproduce cars in jobs.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Perez Mfg.’s August 31 inventory of raw materials is \(150,000. Raw materials purchases in September are \)400,000, and factory payroll cost in September is \(232,000. Overhead costs incurred in September are: indirect materials, \)30,000; indirect labor, \(14,000; factory rent, \)20,000; factory utilities, \(12,000; and factory equipment depreciation, \)30,000. The predetermined overhead rate is 50% of direct labor cost. Job 114 is sold for \(380,000 cash in September. Costs for the three jobs worked on in September follow.
Balances on August 31
Direct materials . . . . . . . . . . . . . . . . . \) 14,000 \( 18,000
Direct labor . . . . . . . . . . . . . . . . . . . . 18,000 16,000
Applied overhead . . . . . . . . . . . . . . . 9,000 8,000
Costs during September
Direct materials . . . . . . . . . . . . . . . . . 100,000 170,000 \) 80,000
Direct labor . . . . . . . . . . . . . . . . . . . . 30,000 68,000 120,000
Applied overhead . . . . . . . . . . . . . . . ? ? ?
Status on September 30 . . . . . . . . . . . Finished (sold) Finished (unsold) In process
Required
1. Determine the total of each production cost incurred for September (direct labor, direct materials, and applied overhead) and the total cost assigned to each job (including the balances from August 31).
2. Prepare journal entries for the month of September to record the following.
a. Materials purchases (on credit).
b. Direct materials used in production. c. Direct labor paid and assigned to Work in Process Inventory.
d. Indirect labor paid and assigned to Factory Overhead. e. Overhead costs applied to Work in Process Inventory.
f. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
g. Transfer of Jobs 114 and 115 to the Finished Goods Inventory. h. Cost of Job 114 in the Cost of Goods Sold account.
i. Revenue from the sale of Job 114.
j. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)
3. Prepare a schedule of cost of goods manufactured.
4. Compute gross profit for September. Show how to present the inventories on the September 30 balance sheet. Analysis Component
5. The over- or underapplied overhead adjustment is closed to Cost of Goods Sold. Discuss how this adjustment impacts business decision making regarding individual jobs or batches of jobs.
A production department’s beginning inventory cost includes \(394,900 of conversion costs. This department incurs an additional \)907,500 in conversion costs in the month of March. Equivalent units of production for conversion total 740,000 for March. Calculate the cost per equivalent unit of conversion using the weighted-average method.
Question: Assume that your company sells portable housing to both general contractors and the government. It sells jobs to contractors on a bid basis. A contractor asks for three bids from different manufacturers. The combination of low bid and high quality wins the job. However, jobs sold to the government are bid on a cost-plus basis. This means price is determined by adding all costs plus a profit based on cost at a specified percent, such as 10%. You observe that the amount of overhead applied to government jobs is higher than that applied to contract jobs. These allocations concern you.
Required
Write a half-page memo to your company’s chief financial officer outlining your concerns with overhead allocation.
At the beginning of a year, a company predicts total direct materials costs of \(900,000 and total overhead costs of \)1,170,000. If the company uses direct materials costs as its activity base to apply overhead, what is the predetermined overhead rate it should use during the year?
Hot wax makes surfboard wax in a single operation. This period, Hotwax purchased \(62,000 in raw materials. Its production department requisitioned \)50,000 of those materials for use in production. Prepare journal entries to record its (1) purchase of raw materials (2) requisition of direct materials.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
