Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, it was estimated that the company would work 240,000 machine-hours and incur $4,800,000 in manufacturing overhead costs.
The company spent the entire month of January working on a large order for 16,000 custom made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:
1.Raw materials purchased on account, $325,000.
2.Raw materials requisitioned for production, $290,000.
3.Labor cost incurred in the factory, $180,000.
4.Depreciation recorded on factory equipment, $75,000.
5.Other manufacturing overhead costs incurred, $62,000.
6.Manufacturing overhead cost was applied to production on the basis of 15,000 machine-hours actually worked during the month.
7.The completed job was moved into the finished goods warehouse on January 31 to await delivery to the customer.
Required:
1.Prepare journal entries to record items (a) through (f) above [ignore item (g) for the moment].
2.Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts.
3.Prepare a journal entry for item (g) above.
4.Compute the unit product cost that will appear on the job cost sheet.