Question

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,192,500 in manufacturing overhead cost at an activity level of 559,000 machine-hours. The company spent the entire month of January working on a large order for 12,300 custom-made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:

a. Raw materials purchased on account, $322,000.
b. Raw materials used in production, $258,000 (80% direct materials and 20% indirect materials).
c. Labor cost accrued in the factory, $159,000 (one-third direct labor and two-thirds indirect labor).
d. Depreciation recorded on factory equipment, $63,100.
e. Other manufacturing overhead costs incurred on account, $85,000.
f. Manufacturing overhead cost was applied to production on the basis of 40,720 machine-hours actually worked during the month.
g. The completed job for 12,300 custom-made machined parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)

Required:
1. Prepare journal entries to record items (a) through (f) above (ignore item (g) for the moment).
2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts.
3. Prepare a journal entry for item (g) above.
4. Compute the unit product cost that will appear on the job cost sheet.

Answer 1

Step-by-step explanation:

Answer:

1.Dr. Raw Material $322,000

Cr. Account Payable $322,000

Dr. Work in process (80/100× 258,000)=$206400

Dr. Manufacturing overheads (20/100× 258,000)= $51600

Cr. Account Payable 258,000

Dr. Work in process 60000(1/3×159,000)=$53000

Dr. Manufacturing overheads

(2/3×159,000)=106,000

Cr. Account Payable 159,000

Dr. Raw Material 63,100

Cr. Account Payable 63,100

Dr. Manufacturing overheads 85,000

Cr. Account Payable 85,000

Dr. Work in process 814400

Cr. Manufacturing overheads 814400

7.5*40,720=$305400

Predetermined Overhead rate can be calculated as = Total Budgeted Overhead cost/ Total budgeted machine hours

$4,192,500/559,000

= $7.5/Machine Hours

2. Dr. -----.------------------------------------ Cr.

Manufacturing overhead

account payable (material)$51600

account payable (labor)106,000

account payable (other)85,000

C/f balance= $305400

$305400

Dr. ----------------------------------------------Cr.

Work in process

account payable (material)$206400

account payable (labor)$53000

account payable (other)$30540

C/f balance= 289940

3.Dr. Finished Goods 289940

Dr. Work in process 289940

4.Unit product Cost = 289940/12,300

= $23.5