Answer:
Degelman Company
1. Predetermined overhead rate for 2014 = Total manufacturing overhead/total direct labor costs
= $81,360/$79,100
= $1.03 per direct labor cost
2. Journal Entries to record the purchase of raw materials, factory labor costs incurred, and the manufacturing overhead costs:
Debit Raw materials $101,700
Credit Accounts Payable $101,700
To record the purchase of raw materials in January, 2014.
Debit Factory labor $79,100
Credit Wages & Salaries Expense $79,100
To Wages Expense to factory labor.
Debit Manufacturing overhead $81,360
Credit Raw materials $19,210
Credit Wages & Salaries expense $22,600
Credit Depreciation expense on equipment $21,470
Credit Accounts Payable $18,080
To record manufacturing overhead costs.
To record manufacturing overhead costs
3a. Debit Job 50 $11,300
Debit Job 51 $44,070
Debit Job 52 $33,900
Credit Raw materials $89,270
To assign raw materials to Jobs.
3b. Debit Job 50 $5,650
Debit Job 51 $28,200
Debit Job 52 $22,600
Credit Factory labor $56,450
To assign direct labor to Jobs.
3c. Debit Job 50 $5,820
Debit Job 51 $29,046
Debit Job 52 $23,278
Credit Manufacturing overhead $58,144
To assign manufacturing overheads to Jobs using the predetermined rate.
4. Job 50 Job 51
Beginning balance $54,240
Raw materials $11,300 $44,070
Direct labor $5,650 28,200
Overhead $5,820 29,046
Total costs $77,010 $101,316
Journal Entries:
Debit Finished Goods Inventory $178,326
Credit Job 50 $77,010
Credit Job 51 $101,316
To record the completion of Jobs 50 and 51.
5. Debit Cost of Goods Sold $178,710
Credit Finished Goods Inventory $178,710
To record the cost of goods sold (Jobs 49 and 50)
Debit Cash (Job 49) $137,860
Debit Accounts Receivable (Job 50) $178,540
Credit Sales Revenue $316,400
To record the sale of Jobs 49 and 50.
5b. Balance in the Finished Goods Inventory account is: $181,094
Job 51 Job 52
Raw materials $44,070 $33,900
Direct labor $28,200 22,600
Overhead $29,046 23,278
Total costs $101,316 $79,778
5c. Over- or underapplied overhead:
Actual overhead costs incurred $81,360
Applied overhead costs $58,144
Underapplied overhead costs $23,216
Explanation:
a) Data and Calculations:
Jan. 1, 2014: Job 50 in process
Job 50 costs:
Direct materials $22,600
Direct labor $13,560
Manufacturing overhead $18,080
Balance = $54,240
Job 49 completed at a cost of $101,700
Raw Materials Inventory = $16,950
Started production on Jobs 51 and 52
Completed Jobs 50 and 51
Sales:
Job 49 = $137,860
Job 50 = $178,540 sold on account
Additional events:
1. Purchase of raw materials $101,700 on account
2. Incurred Factory labor = $79,100
Employer payroll taxes 18,080
Net Factory labor = $61,020
3. Incurred manufacturing overhead:
Indirect materials $19,210
Indirect labor $22,600
Depreciation expense on equipment $21,470
Other manufacturing overhead costs $18,080 on account
Total manufacturing overhead costs $81,360
4. Assigned direct materials, direct labor, and overhead to Jobs:
Job No. Direct Materials Direct Labor Manufacturing Overhead Total
50 $11,300 $5,650 $5,820 ($1.03 * $5,650)
51 44,070 28,200 $29,046 ($1.03 * $28,200)
52 33,900 22,600 $23,278 ( ($1.03 * $22,600)
Total $89,270 $56,450 $58,144
