SOLUTION
(10–15 min.) Accounting for manufacturing overhead.
1. Budgeted manufacturing overhead rate =
$4,140,000
180,000 labor-hours
= $23 per direct labor-hour
2. Work-in-Process Control 4,347,000
3. $4,337,000– $4,347,000 = $10,000 overallocated, an insignificant amount of difference
Furthermore, if the quantities of work-in-process and finished goods inventories are small
relative to Cost of Goods Sold, the difference between proration and write off to Cost of Goods
Sold account would be very small compared to net income.
4-29 Job costing, journal entries. The University of Chicago Press is wholly owned by the
university. It performs the bulk of its work for other university departments, which pay as though
the press were an outside business enterprise. The press also publishes and maintains a stock of
books for general sale. The press uses normal costing to cost each job. Its job-costing system has
two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost
pool (manufacturing overhead, allocated on the basis of direct manufacturing labor costs).
The following data (in thousands) pertain to 2017:
4-1
Required:
1. Prepare an overview diagram of the job-costing system at the University of Chicago Press.
2. Prepare journal entries to summarize the 2017 transactions. As your final entry, dispose of the
year-end under- or overallocated manufacturing overhead as a write-off to Cost of Goods
Sold. Number your entries. Explanations for each entry may be omitted.
3. Show posted T-accounts for all inventories, Cost of Goods Sold, Manufacturing Overhead
Control, and Manufacturing Overhead Allocated.
4. How did the University of Chicago Press perform in 2017?
SOLUTION
(3545 min.) Job costing, journal entries.
Some instructors may also want to assign Exercise 4-30. It demonstrates the relationships of the
general ledger to the underlying subsidiary ledgers and source documents.
1.
2. & 3.
This answer assumes COGS given of $4,020 does not include the writeoff of overallocated
manufacturing overhead.
2. (1) Materials Control
Accounts Payable Control
800
800
(2) Work-in-Process Control
710
4-2
COST OBJECT:
PRINT JOB
COST
ALLOCATION
BASE
DIRECT
COST
Manufacturing Overhead
Direct Manufacturing
Labor Costs
Direct
Materials
INDIRECT
COST
POOL
Direct
Manuf
.
Labor
Indirect Costs
Direct Costs
3.
Materials Control
Bal. 1/1/2017
100
(2) Work-in-Process Control
Bal. 12/31/2017 90
Work-in-Process Control
Bal. 1/1/2017
(Direct materials)
(4) Wages Payable Control
(Direct
manuf. labor)
(7) Manuf. Overhead
Allocated
60
710
1,300
2,080
(8) Finished Goods Control
Bal. 12/31/2017 30
Finished Goods Control
Bal. 1/1/2017
(8) WIP Control
500
(10) Cost of Goods Sold 4,020
Bal. 12/31/2017 600
Cost of Goods Sold
(10) Finished Goods
Control (Goods sold) 4,020
(11) Manufacturing Overhead
Allocated (Adjust for
Bal. 12/31/2017 3,890
Manufacturing Overhead Control
(4) Wages Payable Control
(5) Accum. Deprn. Control
(6) Accounts Payable Control
Bal. 0
Manufacturing Overhead Allocated
(11) To close 2,080 (7) Work-in-Process Control
Bal. 0
4-3
4. Gross margin = Revenues − Cost of goods sold = $8,000 − $3,890 = $4,110. This is a very
4-30 Journal entries, T-accounts, and source documents. Visual Company produces gadgets
for the coveted small appliance market. The following data reflect activity for the year 2017:
Visual Co. uses a normal-costing system and allocates overhead to work in process at a rate of
$3.10 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no
inventory account for indirect materials.
Required:
1. Prepare journal entries to record the transactions for 2017 including an entry to close out
over- or underallocated overhead to cost of goods sold. For each journal entry indicate the
source document that would be used to authorize each entry. Also note which subsidiary
ledger, if any, should be referenced as backup for the entry.
2. Post the journal entries to T-accounts for all of the inventories, Cost of Goods Sold, the
Manufacturing Overhead Control Account, and the Manufacturing Overhead Allocated
Account.
SOLUTION
(35 minutes) Journal entries, T-accounts, and source documents.
1.
(1) Direct Materials Control 121,000
(2) Work in Process Controla 112,400
4-4
(3) Work in Process Control 87,000
Manufacturing Overhead Control 54,400
(4) Manufacturing Overhead Control 207,100
Salaries Payable Control 46,000
(5) Work in Process Control 269,700
´
Source Document: Labor Time Sheets, Job Cost Record
Subsidiary Ledger: Work-in-Process Inventory Records by Jobs
(6) Finished Goods Controlb449,600
(7) Cost of Goods Soldc478,600
Source Document: Sales Invoice, Completed Job Cost Record
(8) Manufacturing Overhead Allocated 269,700
Manufacturing Overhead Control
Source Document: Prior Journal Entries
4-5
Source Document: Depreciation Schedule, Marketing Payroll Request, Invoice for
Advertising, Sales Commission Schedule.
Subsidiary Ledger: Employee Salary Records, Administration Cost Records, Marketing Cost
Records.
aMaterials used =
Beginning direct
materials inventory
+ Purchases –
Ending direct
materials inventory
= $9,400 + $121,000 $18,000 = $112,400–
b
Cost of
goods manufactured
=
Beginning WIP
inventory
+
Manufacturing
cost
–
Ending WIP
inventory
= $6,500 + ($112,400 + $87,000 + $269,700) $26,000 = $449,600–
cCost of goods sold =
Beginning finished
goods inventory
+
Cost of goods
manufactured
–
Ending finished
goods inventory
= $60,000 + $449,600 $31,000 = $478,600–
2. T-accounts
Direct Materials Control
Bal. 1/1/2017
9,400
(2) Work-in-Process Control
Bal. 12/31/2017 18,000
Work-in-Process Control
Bal. 1/1/2017
(3) Wages Payable Control
(5) Manuf. Overhead
Allocated
6,500
269,700
(6) Finished Goods Control
Bal. 12/31/2017 26,000
Finished Goods Control
Bal. 1/1/2017
(6) WIP Control
60,000
(7) Cost of Goods Sold 478,600
Bal. 12/31/2017 31,000
4-6
Cost of Goods Sold
(7) Finished Goods Control
(8) Manufacturing Overhead
Manufacturing Overhead Control
(3) Wages Payable Control
(Indirect manuf. labor)
(4) Salaries Payable Control
54,400
(8) To close 261,500
Bal. 0
Manufacturing Overhead Allocated
(8) To close 269,700 (5) Work-in-Process Control
Bal. 0
4-31 Job costing, journal entries. Donald Transport assembles prestige manufactured homes.
Its job-costing system has two direct-cost categories (direct materials and direct manufacturing
labor) and one indirect-cost pool (manufacturing overhead allocated at a budgeted $31 per
machine-hour in 2017). The following data (in millions) show operation costs for 2017:
Required:
1. Prepare an overview diagram of Donald Transport’s job-costing system.
2. Prepare journal entries. Number your entries. Explanations for each entry may be omitted.
Post to T-accounts. What is the ending balance of Work-in-Process Control?
3. Show the journal entry for disposing of under- or overallocated manufacturing overhead
4-7
directly as a year-end writeoff to Cost of Goods Sold. Post the entry to T-accounts.
4. How did Donald Transport perform in 2017?
SOLUTION
(45 min.) Job costing, journal entries.
Some instructors may wish to assign Problem 4-30. It demonstrates the relationships of journal
entries, general ledger, subsidiary ledgers, and source documents.
1. An overview of the product-costing system is
2. Amounts in millions.
(1) Materials Control
Accounts Payable Control
154
154
(2) Work-in-Process Control
152
4-8
Manufacturing
Overhead
Machine-Hours
Indirect Costs
Direct Costs
Direct
Materials
Direct
Manuf. Labor
INDIRECT
COST
POOL
COST
ALLOCATION
BASE
COST OBJECT
PRODUCT
DIRECT
COSTS
The posting of entries to T-accounts is as follows:
Materials Control Work-in-Process Control
Bal 18 (2) 152 Bal. 9
(2) 152
(9) 298
(1) 154 (3) 19
Finished Goods Control Cost of Goods Sold
Bal. 10
(10a) 294 (10a) 294
Manufacturing Department
Overhead Control Manufacturing Overhead Allocated
(3) 19
(5) 34
(6) 28
(7) 13
(11) 94 (11) 93 (8) 93
Accounts Payable Control Wages Payable Control
Accumulated Depreciation Various Liabilities
Accounts Receivable Control Revenues
The ending balance of Work-in-Process Control is $52 million.
3. (11) Manufacturing Overhead Allocated 93
Cost of Goods Sold 1
4. Gross margin = Revenues Cost of goods sold = $410 $295 = $115.
4-32 Job costing, unit cost, ending work in process. Rowan Company produces pipes for
concert-quality organs. Each job is unique. In April 2016, it completed all outstanding orders,
and then, in May 2016, it worked on only two jobs, M1 and M2:
4-9
Direct manufacturing labor is paid at the rate of $25 per hour. Manufacturing overhead costs are
allocated at a budgeted rate of $22 per direct manufacturing labor-hour. Only Job M1 was
completed in May.
Required:
1. Calculate the total cost for Job M1.
2. 1,600 pipes were produced for Job M1. Calculate the cost per pipe.
3. Prepare the journal entry transferring Job M1 to finished goods.
4. What is the ending balance in the Work-in-Process Control account?
4-10