Problem - Lemmon Co.'s March 31 inventory of raw materials is $170,000. Raw material purchases in April are $310,000 and factory payroll cost in April is $224,000. Overhead costs incurred in Apri are: indirect material,$25,000; indirect labor, $19,000; factory rent,$25,000; factory utilities, $13,000; and factory equipment depreciation,$41,000. The predetermined overhead rate is 6% of direct labor cost. Job 306 is solid for $400,000 cash in April. Costs of the three jobs worked on in April follow.
Job 306 Job 307 Job308
Balance on March 31
Direct material.......$ 9,000 $17,000
Direct labor.......... 19,000 5,000
Applied overhead...... 12,350 3,250
Costs durning April
Direct materials...... 75,000 160,000 $ 65,000
Direct labor.......... 31,000 74,000 100,000
Applied Overhead....... ? ? ?
Status on April 30.. Finish (sold)Finish(unsold)In process
Required:
1. Determine the total each production cost incurred for April (direct labor, direct materials, and applied over head), and the total cost assigned to each job (including the balance from March 31).
2. Prepare journal entries for the month of April to record the following.
a. Materials purchases (on credit), factory payroll(paid in cash), and actual overhead costs including indirect materials and indirect labor.(Factory rent and utilities are paid in cash.)
b. Assignment of direct materials, direct labor, and applied overhead costs to the Goods in process Inventory.
c. Transfer of jobs 306 and 307 to the Finished Goods Inventory.
d. cost of goods sold for Job 306.
e. Revenue from the sale of Job 306.
f. Assignment of any underapplied overhead to the Cost of Goods Solds account. (The amount is not material.)
3. Prepare a manufacturing statement for April (use a single line presentation for direct materials and show the details of overhead cost).
4. Compute gross profit for April. Show how to present the inventories on the April 30 balance sheet.
Analysis Component
5. The over-or underapplied overhead is closed to Cost of Goods Sold. Discuss how this adjustment impacts business decision making regarding individual job or batches of jobs?
Attachment:- Template.rar