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Selected cost data for Classic Print Co. are as follows:

Estimated manufacturing overhead cost for the year

$125,000

Estimated direct labor cost for the year

78,125

Actual manufacturing overhead cost for the year

116,000

Actual direct labor cost for the year

67,000

Requirements

2. Prepare the journal entry to allocate overhead costs for the year.

Short Answer

Expert verified

Date

Particulars

Debit ($)

Credit ($)

Work in process inventory

107,200

Manufacturing overhead

107,200

Step by step solution

01

The predetermined overhead allocation rate per direct labor dollar.

Predeterminedoverheadallocationrate=EstimatedmanufacturingoverheadcostfortheyearEstimateddirectlaborcostfortheyear=$125,00078,125=$1.60

02

The overhead allocated during the year

Overheadallocation=Predeterminedoverheadallocationrate×Actualdirectlaborcost=$1.60×67,000=$107,200

The manufacturing overhead of the company is allocated in the books of the company by debiting the work in process inventory and by crediting the manufacturing overhead.

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Most popular questions from this chapter

Question: Why does the sale of a completed job require two journal entries? What are they?

Question: Journalize the following transactions for Marge’s Sofas. Explanations are not required.

f. Allocated manufacturing overhead to jobs, 200% of direct labor costs.

Following is a list of cost system characteristics and sample companies. Match each to either job order costing or process costing.

h. A company that bottles milk into one-gallon containers.

Superior Construction, Inc. is a home builder in Arizona. Superior uses a job order costing system in which each house is a job. Because it constructs houses, the company uses an account titled Construction Overhead. The company applies overhead based on estimated direct labor costs. For the year, it estimated construction overhead of \(1,150,000 and total direct labor costs of \)5,750,000. The following events occurred during August:

a. Purchased materials on account, \(400,000.

b. Requisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned.

Direct material

Direct Labor

House 402

\)58,000

\(44,000

House 403

62,000

32,000

House 404

61,000

58,000

House 405

86,000

57,000

c. The company incurred total wages of \)300,000. Use the data from Item b to assign the wages. Wages are not yet paid.

d. Depreciation of construction equipment, \(6,700.

e. Other overhead costs incurred: Equipment rentals paid in cash, \)30,000; Worker liability insurance expired, \(7,000.

f. Allocated overhead to jobs.

g. Houses completed: 402, 404.

h. House sold on account: 404 for \)250,000.

Requirements

1. Calculate Superior’s predetermined overhead allocation rate for the year.

2. Prepare journal entries to record the events in the general journal.

3. Open T-accounts for Work-in-Process Inventory and Finished Goods Inventory.

Post the appropriate entries to these accounts, identifying each entry by letter.

Determine the ending account balances, assuming that the beginning balances

were zero.

4. Add the costs of the unfinished houses, and show that this total amount equals the ending balance in the Work-in-Process Inventory account.

5. Add the costs of the completed house that has not yet been sold, and show that this equals the ending balance in Finished Goods Inventory.

6. Compute gross profit on the house that was sold. What costs must gross profit

cover for Superior Construction?

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

j. A manufacturer of tennis shoes

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