End of Chapter: Job Costing

Problem for Self-study

Your manager asks you to bring the following incomplete accounts of Endeavor Printing, Inc., up to date through January 31, 2020. Consider the data that appear in the T-accounts as well as the following information in items (a) through (j).

Endeavor’s normal-costing system has two direct-cost categories (direct material costs and direct manufacturing labor costs) and one indirect-cost pool (manufacturing overhead costs, which are allocated using direct manufacturing labor costs).

The table depicts partial records for materials control, wages payable control, work-in-process control, manufacturing overhead control, finished goods control, and costs of goods sold. The details of the table are as follows:

1. Materials control: 12-31-2019 Bal. 30,000

2. Wages payable control: 1-31-2020 Bal. 6,000

3. Work-in-process control: Blank

4. Manufacturing overhead control: 1-31-2020 Bal. 114,000

5. Finished goods control: 12-31-2019 Bal. 40,000

6. Cost of goods sold: Blank

Additional information follows:

Manufacturing overhead is allocated using a budgeted rate that is set every December. You forecast next year’s manufacturing overhead costs and next year’s direct manufacturing labor costs. The budget for 2020 is $1,200,000 for manufacturing overhead costs and $800,000 for direct manufacturing labor costs.
The only job unfinished on January 31, 2020, is No. 419, on which direct manufacturing labor costs are $4,000 (250 direct manufacturing labor-hours) and direct material costs are $16,000.
Total direct materials issued to production during January 2020 are $180,000.
Cost of goods completed during January is $360,000.
Materials inventory as of January 31, 2020, is $40,000.
Finished-goods inventory as of January 31, 2020, is $30,000.
All plant workers earn the same wage rate. Direct manufacturing labor-hours used for January total 5,000 hours. Other labor costs total $20,000.
The gross plant payroll paid in January equals $104,000. Ignore withholdings.
All “actual” manufacturing overhead costs incurred during January have already been posted.
All materials are direct materials.

Calculate the following:

Materials purchased during January
Cost of Goods Sold during January
Direct manufacturing labor costs incurred during January
Manufacturing Overhead Allocated during January
Balance, Wages Payable Control, December 31, 2019
Balance, Work-in-Process Control, January 31, 2020
Balance, Work-in-Process Control, December 31, 2019
Manufacturing Overhead Underallocated or Overallocated for January 2020

Solution

Amounts from the T-accounts are labeled “(T).”

1. From Materials Control T-account, Materials purchased: $$ 180,000 (c) + $ 40,000 (e) - 30,000 (T) = $ 190,000$
2. From Finished Goods Control T-account, Cost of Goods Sold: $$ 40,000 (T) + $ 360,000 (d) - $ 30,000 (f) = $ 370,000$
3. Direct manufacturing wage rate: $begin inline style $ text 4,000 end text thin space left parenthesis straight b right parenthesis divided by 250 end style$ direct manufacturing labor-hours $begin inline style left parenthesis straight b right parenthesis equals straight $ 16 end style$ per direct manufacturing labor-hour
Direct manufacturing labor costs: 5,000 direct manufacturing labor-hours $begin inline style left parenthesis straight g right parenthesis cross times $ 16 end style$ per direct manufacturing $begin inline style text labor end text short dash back space text hour end text equals $ text 80,000 end text end style$
4. Manufacturing overhead rate: $$ 1,200,000 (a) \div $ 800,000 (a) = 150 %$ Manufacturing Overhead Allocated: 150% of $$ 80,000 (see 3) = 1 . 50 \times $ 80,000 = $ 120,000$
5. From Wages Payable Control T-account, Wages Payable Control, December 31, 2019: $$ 104,000 (h) + $ 6,000 (T) - $ 80,000 (see 3) - $ 20,000 (g) = $ 10,000$
6. Work-in-Process Control, January 31, 2020: $$ 16,000 (b) + $ 4,000 (b) + 150 %$ of $begin inline style $ text 4,000 end text thin space left parenthesis straight b right parenthesis equals $ text 26,000 end text end style$ (This answer is used in item 7.)
7. From Work-in-Process Control T-account, Work-in-Process Control, December 31, 2019: $$ 360,000 (d) + $ 26,000 (see 6) - $ 180,000 (c) - $ 80,000 (see 3) - $ 120,000 (see 4) = $ 6,000$
8. Manufacturing overhead overallocated: $$ 120,000 (see 4) - $ 114,000 (T) = $ 6,000$ .

Letters alongside entries in T-accounts correspond to letters in the preceding additional information. Numbers alongside entries in T-accounts correspond to numbers in the preceding requirements.

*Can be computed only after all other postings in the account have been made.

The table depicts additional records for materials control, work-in-process control, finished goods control, wages payable control, manufacturing overhead control, manufacturing overhead allocated, and costs of goods sold. The details of the table are as follows:

1. Materials control

December 31, 2019, Bal. (given) 30,000
(1) 190,000 (can be computed only after all other postings in the account have been made); (c) 180,000
January 31, 2020, Bal. (e) 40,000

2. Work-in-process control

December 31, 2019, Bal. (7) 6,000; (3) 360,000
Direct materials (c) 180,000
Direct manufacturing labor (b) (g) (3) 80,000
Manufacturing overhead allocated (3) (a) (4) 120,000
January 31, 2020, Bal. (b) (6) 26,000

3. Finished goods control

December 31, 2019, Bal. (given) 40,000; (2) 370,000
(d) 360,000
January 31, 2020, Bal. (f) 30,000

4. Wages payable control

(h) 104,000; December 31, 2019, Bal. (5) 10,000
(g) (3) 80,000
(g) 20,000
January 31, 2020 (given) 6,000

5. Manufacturing overhead control

Total January charges (given) 114,000

6. Manufacturing overhead allocated

(3) (a) (4) 120,000

7. Cost of goods sold

(d) (f) (2) 370,000