Chapter 17: Q17-35PGB (page 953)

Ye Technology Co. manufactures DVDs for computer software and entertainment companies. Ye uses job order costing.
On November 2, Ye began production of 5,200 DVDs, Job 423, for Prototype
Pictures for $1.70 sales price per DVD. Ye promised to deliver the DVDs to Prototype by November 5. Ye incurred the following direct costs:
Date
Labor time record no.
Description
Amount
11/02
655
10 hours @ 16 per hour
$160
11/03
656
20 hours @13 per hour
260
Date
Material requisition no.
Description
Amount
11/02
63
31 lbs. polycarbonate plastic @ 11 per lb.
$341
11/02
64
25 lbs. acrylic plastic @ $28 per lb.
700
11/03
74
3 lbs. refined alluminium @ 42 per lb.
126
Ye Technology allocates manufacturing overhead to jobs based on the relation
between estimated overhead of $550,000 and estimated direct labor costs of $440,000. Job 423 was completed and shipped on November 3.
Requirements
1. Prepare a job cost record for Job 423. Calculate the predetermined overhead allocation rate (round to two decimal places); then allocate manufacturing overhead to the job.
2. Journalize in summary form the requisition of direct materials and the assignment of direct labor and the allocation of manufacturing overhead to Job 423. Wages are not yet paid.
3. Journalize completion of the job and the sale of the 5,200 DVDs on account.

Short Answer

Expert verified

1. The unit cost of the product as per the job cost record for job no. is $0.41 and the predetermined overhead allocation rate is 125% and the amount of allocated overhead to the job is $525.

2. Journal entries to record the requisition of direct materials and the assignment of direct labot and the allocation of manufacturing overhead

Date	Particulars	Debit ($)	Credit ($)
1.	Work-in-process inventory	1,167
	Raw material inventory		1,167

2.	Work-in-process inventory	420
	Wages payable		420

3.	Work-in-process inventory	525
	Manufacturing overhead		525

3. Journal entries to record the completion of job and sale of job

Date	Particulars	Debit ($)	Credit ($)
1.	Finished goods inventory	2,112
	Work-in-process inventory		2,112

2.	Accounts receivable (5,200 x $1.70)	8,840
	Sales revenue		8,840

3.	Cost of goods sold	2,112
	Finished goods inventory		2,112

Step by step solution

Predetermined overhead allocation rate

The predetermined overhead allocation rate is an allocation rate which the company estimates before starting the manufacturing process. It is based on budgeted data.

Job cost record of Job no. 423

Predetermined overhead allocation rate

$P r e d e r m i n e d o v e r h e a d a l l o c a t i o n r a t e = \frac{E s t i m a t e d O v e r h e a d}{E s t i m a t e d d i r e c t l a b o r \cos t} = \frac{$ 550, 000}{$ 440, 000} = 125 %$

Allocated manufacturing overhead cost

$A l l o c a t e d m a n u f a c t u r i n g o v e r h e a d \cos t = P r e d e t e r m i n e d o v e r h e a d a l l o c a t i o n r a t e \times A c t u a l d i r e c t l a b o r \cos t = 125 % \times $ 420 = $ 525$

The raw material inventory used in manufacturing process

$R a w m a t e r i a l i n v e n t o r y u s e d = C o s t o f m a t e r i a l r e q u i s i t i o n n o . 63 + C o s t o f m a t e r i a l r e q u i s i t i o n n o . 64 + C o s t o f m a t e r i a l r e q u i s i t i o n n o 74 = $ 341 + $ 700 + $ 126 = $ 1, 167$

The wages incurred in manufacturing

$W a g e s = L a b o r \cos t o f r e c o r d n o . 655 + L a b o r \cos t o f r e c o r d n o . 656 = $ 160 + $ 260 = $ 420$

Cost of manufacturing

$C o s t o f m a n u f a c t u r i n g = D i r e c t M a t e r i a l + D i r e c t L a b o r + M a n u f a c t u r i n g o v e r h e a d = $ 1, 167 + $ 420 + $ 525 = $ 2112$

Unlock Step-by-Step Solutions & Ace Your Exams!

Full Textbook Solutions
Get detailed explanations and key concepts
Unlimited Al creation
Al flashcards, explanations, exams and more...
Ads-free access
To over 500 millions flashcards
Money-back guarantee
We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

June 1 balance	\(36,000
Direct materials used	32,000
Direct labor assigned to jobs	40,000
Manufacturing overhead allocated to jobs	28,000

June 1 balance	\(36,000
Direct materials used	32,000
Direct labor assigned to jobs	40,000
Manufacturing overhead allocated to jobs	28,000

Estimated manufacturing overhead	\(500,000	Actual manufacturing overhead	\)550,000
Estimated direct labor hours	10,000 hours	Actual direct labor hours	10,500 hours

June 1 balance	\(36,000
Direct materials used	32,000
Direct labor assigned to jobs	40,000
Manufacturing overhead allocated to jobs	28,000

Short Answer

Step by step solution

Predetermined overhead allocation rate

Job cost record of Job no. 423

Predetermined overhead allocation rate

Allocated manufacturing overhead cost

The raw material inventory used in manufacturing process

The wages incurred in manufacturing

Cost of manufacturing

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Nature of Business

Influences On Business

Organizational Behavior

Financial Performance

Human Resources

Business Development

Study anywhere. Anytime. Across all devices.

Date	Labor time record no.	Description	Amount
11/02	655	10 hours @ 16 per hour	\)160
11/03	656	20 hours @13 per hour	260

Date	Material requisition no.	Description	Amount
11/02	63	31 lbs. polycarbonate plastic @ 11 per lb.	\(341
11/02	64	25 lbs. acrylic plastic @ \)28 per lb.	700
11/03	74	3 lbs. refined alluminium @ 42 per lb.	126