Chapter 15: Q5QS (page 695)
During the current month, a company that uses job order costing incurred a monthly factory payroll of \(180,000. Of this amount, \)40,000 is classified as indirect labor and the remainder as direct. Prepare journal entries to record these transactions.
Both sides of the journal total$360,000.
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Diaz and Associates incurred the following costs in completing a tax return for a large company. Diaz applies overhead at 50% of direct labor cost.
Labor Hours Used Hourly Rate
Partner . . . . . . . . . . . . . . . . . . . 5 $500
Senior manager . . . . . . . . . . . . 12 200
Staff accountants . . . . . . . . . . . 100 50
1. Prepare journal entries to record direct labor and the overhead applied.
2. Prepare the journal entry to record the cost of services provided. Assume the beginning Services in Process Inventory account has a zero balance.
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?
A recent balance sheet for Porsche AG shows beginning raw materials inventory of €83 million and ending raw materials inventory of €85 million. Assume the company purchased raw materials (on account) for €3,108 million during the year.
(1) Prepare journal entries to record (a) the purchase of raw materials and (b) the use of raw materials in production.
(2) What do you notice about the € amounts in your journal entries?
In December 2016, Learer Company’s manager estimated next year’s total direct labor cost assuming 50 persons working an average of 2,000 hours each at an average wage rate of \(25 per hour. The manager also estimated the following manufacturing overhead costs for 2017.
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \) 319,200
Factory supervision . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,000
Rent on factory building . . . . . . . . . . . . . . . . . . . . . . . . 140,000
Factory utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,000
Factory insurance expired . . . . . . . . . . . . . . . . . . . . . . . 68,000
Depreciation—Factory equipment . . . . . . . . . . . . . . . . . 480,000
Repairs expense—Factory equipment . . . . . . . . . . . . . 60,000
Factory supplies used . . . . . . . . . . . . . . . . . . . . . . . . . . 68,800
Miscellaneous production costs . . . . . . . . . . . . . . . . . . 36,000
Total estimated overhead costs . . . . . . . . . . . . . . . . . . \(1,500,000
At the end of 2017, records show the company incurred \)1,520,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, \(604,000; Job 202, \)563,000; Job 203, \(298,000; Job 204, \)716,000; and Job 205, \(314,000. In addition, Job 206 is in process at the end of 2017 and had been charged \)17,000 for direct labor. No jobs were in process at the end of 2016. The company’s predetermined overhead rate is based on direct labor cost.
Required
1. Determine the following.
a. Predetermined overhead rate for 2017.
b. Total overhead cost applied to each of the six jobs during 2017.
c. Over- or underapplied overhead at year-end 2017.
2. Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of 2017.
Use information in Exercise 15-7 to prepare journal entries for the following events for the month of May.
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