Question

Marcelino Co.’s March 31 inventory of raw materials is $80,000. Raw materials purchases in April are $500,000, and factory payroll cost in April is $363,000. Overhead costs incurred in April are: indirect materials, $50,000; indirect labor, $23,000; factory rent, $32,000; factory utilities, $19,000; and factory equipment depreciation, $51,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $635,000 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 $29,000 $35,000
Direct labor 20,000 18,000
Applied overhead 10,000 9,000
Costs during April
Direct materials 135,000 220,000 $100,000
Direct labor 85,000 150,000 105,000
Applied overhead 42,500 75,000 52,500
Status on April 30 Finished (sold) Finished (unsold) In the process
a. Prepare journal entries to record the transactions of Marcelino Company during the month of April.
b. Calculate the total cost, and account classification for each job worked on during April.
c. Prepare a schedule of cost of goods manufactured for Marcelino Company during the month of April.
d. Calculate the gross profit on the sale of the job(s) during April.

Answer 1

Answer:

a. Prepare journal entries

J1

Raw Materials $500,000 (debit)

Cash $500,000 (credit)

J2

Factory Labor $363,000 (debit)

Salaries and Wages Accrued $363,000 (credit)

J3

Overheads $175,000 (debit)

indirect materials $50,000 (credit)

Indirect labor $23,000 (credit)

factory rent $32,000 (credit)

factory utilities $19,000 (credit)

factory equipment depreciation $51,000 (credit)

J4

Work in Process $181,500 (debit)

Overheads $181,500 (credit)

b.  the total cost, and account classification for each job

                                                                Job 306         Job 307       Job 308

Direct materials                                      135,000           220,000     100,000

Direct labor                                              85,000            150,000      105,000

Applied overhead                                   42,500              75,000       52,500

Total Cost                                              262,500           445,000      257,500

c. Cost of goods manufactured for Marcelino Company

Job 306     $ 262,500

Job 307     $ 445,000  

Job 308     $ 257,500

Total          $ 965,000

d. the gross profit on the sale of the job(s)

                                                                                    Job 306

Sales                                                                                          $635,000

Less Cost of Goods Sold :

Opening Finished Inventory                                $0

Add Cost of Manufacture                                $262,500

Less Closing  Finished Inventory                        $0               ($262,500)

Gross Profit                                                                               $372,4500

Explanation:

Only Job 306 was sold, thus the gross profit is calculated on the sold job only.