Question

Marcelino Co.'s March 31 inventory of raw materials is $88,000. Raw materials purchases in April are $530,000, and factory payroll cost in April is $386,000. Overhead costs incurred in April are: indirect materials, $51,000; indirect labor, $28,000; factory rent, $40,000; factory utilities, $25,000; and factory equipment depreciation, $51,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $700,000 cash in April. Costs of the three jobs worked on in April follow.

Job 306 Job 307 Job 308
Balances on March 31
Direct materials $31,000 $42,000
Direct labor 21,000 17,000
Applied overhead 10,500 8,500
Costs during April
Direct materials 132,000 210,000 $100,000
Direct labor 103,000 153,000 102,000
Applied overhead ? ? ?
Status on April 30 Finished (sold) Finished (unsold) In process
Determine the total of each production cost incurred for April (direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including the balances from March 31).
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 306 and 307 to Finished Goods Inventory.
h. Cost of goods sold for Job 306.
i. Revenue from the sale of Job 306.
j. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

Answer 1

Marcelino Co.

a. Total materials purchases = $530,000

b. Direct materials used in production:

Beginning balance of direct materials = $73,000

Current direct materials used = 442,000

Total materials used in production = $515,000

c. Direct labor paid and assigned to Work in Process Inventory:

Job 307 Job 308 Total

Beginning Direct labor $17,000 $17,000

Current Direct labor 153,000 $102,000 255,000

Total Direct labor $170,000 $102,000 $272,000

d. Indirect labor paid and assigned to Factory Overhead:

Indirect labor $28,000

Applied = $27,720 (99% ($193,000/$195,000))

e. Overhead costs applied to Work in Process Inventory

=

Job 307 Job 308 Total

76,500 51,000 $127,500

f. Actual overhead costs incurred and paid in cash:

Indirect materials $51,000

Indirect labor, $28,000

Factory rent, $40,000

Factory utilities, $25,000

Total overhead costs = $144,000

g. Transfer of Jobs 306 and 307 to Finished Goods Inventory:

Job 307 Job 308 Total

Balances on March 31

Direct materials $42,000 $42,000

Direct labor 17,000 17,000

Applied overhead 8,500 8,500

Costs during April

Direct materials 210,000 $100,000 $310,000

Direct labor 153,000 102,000 255,000

Applied overhead 76,500 51,000 127,500

Total cost $507,000 $253,000 $760,000

h. Cost of goods sold for Job 306 = $349,000

i. Revenue from the sale of Job 306 = $700,000

j. Assignment of underapplied overhead to the Cost of Goods Sold account:

Total overhead applied = $179,000

Total overhead incurred = 195,000

Underapplied overhead = $16,000

Step-by-step explanation:

a) Data and Calculations:

Raw materials Inventory (March 31) $88,000

Purchases of raw materials during April = $530,000

Factory Payroll cost = $386,000

Overhead costs =

Indirect materials $51,000

Indirect labor, $28,000

Factory rent, $40,000

Factory utilities, $25,000

Factory equipment depreciation, $51,000

Total overhead costs = $195,000

Job 306 Job 307 Job 308 Total

Balances on March 31

Direct materials $31,000 $42,000 $73,000

Direct labor 21,000 17,000 38,000

Applied overhead 10,500 8,500 19,000

Balances $62,500 $67,500 $130,000

Costs during April

Direct materials 132,000 210,000 $100,000 $442,000

Direct labor 103,000 153,000 102,000 358,000

Applied overhead 51,500 76,500 51,000 179,000

Total cost $349,000 $507,000 $253,000 $1,109,000