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Widmer Watercraft’s predetermined overhead rate for year 2013 is 200% of direct labor. Information on the company’s production activities during May 2013 follows.
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Question & Answer: Widmer Watercraft’s predetermined overhead rate for year 2013 is 200% of direct labor. Information on the company’s…..
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| a. | Purchased raw materials on credit, $240,000. |
| b. | Paid $129,600 cash for factory wages. |
| c. | Paid $15,750 cash to a computer consultant to reprogram factory equipment. |
| d. | Materials requisitions record use of the following materials for the month. |
| Job 136 | $ | 48,500 | |
| Job 137 | 33,500 | ||
| Job 138 | 19,200 | ||
| Job 139 | 22,600 | ||
| Job 140 | 6,800 | ||
| Total direct materials | 130,600 | ||
| Indirect materials | 20,000 | ||
| Total materials used | $ | 150,600 | |
| e. | Time tickets record use of the following labor for the month. |
| Job 136 | $ | 12,100 | |
| Job 137 | 10,500 | ||
| Job 138 | 37,900 | ||
| Job 139 | 39,400 | ||
| Job 140 | 3,200 | ||
| Total direct labor | 103,100 | ||
| Indirect labor | 26,500 | ||
| Total | $ | 129,600 | |
| f. | Applied overhead to Jobs 136, 138, and 139. |
| g. | Transferred Jobs 136, 138, and 139 to Finished Goods. |
| h. | Sold Jobs 136 and 138 on credit at a total price of $545,000. |
| i. | The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance). |
| Depreciation of factory building | $ | 69,000 | |
| Depreciation of factory equipment | 37,000 | ||
| Expired factory insurance | 11,000 | ||
| Accrued property taxes payable | 36,500 | ||
| j. | Applied overhead at month-end to the Goods in Process (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.
|
Expert Answer
Solution:
1) Preparing a Job Cost Sheet for Each Job Worked on During the Month:
| Job 136 | Job 137 | Job 138 | Job 139 | Job 140 | |
| Materials | $48,500 | $33,500 | $19,200 | $22,600 | $6,800 |
| Labor | $12,100 | $10,500 | $37,900 | $39,400 | $3,200 |
| Overhead (200% of Labor) | $24,200 | $21,000 | $75,800 | $78,800 | $6,400 |
| Total Cost | $84,800 | $65,000 | $132,900 | $140,800 | $16,400 |
2) Preparing Journal Entries to Record the Events and Transactions a through j:
| Event | General journal | Debit | Credit |
| a | Raw Materials Inventory | $240,000 | |
| Accounts Payable | $240,000 | ||
| b | Factory Payroll | $129,600 | |
| Cash | $129,600 | ||
| c | Factory Overhead | $15,750 | |
| Cash | $15,750 | ||
| d | Goods in process inventory | $130,600 | |
| Factory overhead | $20,000 | ||
| Raw materials inventory | $150,600 | ||
| e | Goods in process inventory | $103,100 | |
| Factory overhead | $26,500 | ||
| Factory payroll | $129,600 | ||
| f | Goods in process inventory | $178,800 | |
| Factory Overhead | $178,800 | ||
| g | Finished Goods Inventory | $358,500 | |
| Goods in process inventory | $358,500 | ||
| h (1) | Accounts Receivable | $545,000 | |
| Sales | $545,000 | ||
| h (2) | Cost of goods sold | $217,700 | |
| Finished goods inventory | $217,700 | ||
| i | Factory Overhead | $153,500 | |
| Accum. depreciation – Factory building | $69,000 | ||
| Accum. depreciation – Factory equipment | $37,000 | ||
| Prepaid insurance | $11,000 | ||
| Property taxes payable | $36,500 | ||
| j | Goods in process inventory | $27,400 | |
| Factory overhead | $27,400 |
3) Preparing T-Accounts for the Each of the Following General Ledger Accounts:
| Raw Materials Inventory | |||
| a | $240,000 | ||
| $150,600 | d | ||
| Ending Balance | $89,400 | ||
| Factory Payroll | |||
| b | $129,600 | ||
| $129,600 | e | ||
| Ending Balance | $0 | ||
| Goods In Process Inventory | |||
| d | $130,600 | ||
| e | $103,100 | ||
| f | $178,800 | ||
| $358,500 | g | ||
| j | $27,400 | ||
| Ending Balance | $81,400 | ||
| Factory Overehead | |||
| c | $15,750 | ||
| d | $20,000 | ||
| e | $26,500 | ||
| $178,800 | f | ||
| i | $153,500 | $27,400 | j |
| Ending Balance | $9,550 | ||
| Finished Goods Inventory | |||
| g | $358,500 | ||
| $217,700 | h | ||
| Ending Balance | $140,800 | ||
| Cost of Goods Sold | |||
| h | $217,700 | ||
| Ending Balance | $217,700 | ||
