Question: MARIN CORPORATION
MARIN CORPORATION uses a job order cost system and uses applied overhead. The cost driver for overhead is direct labor cost. On January 1, 2017 it was estimated that during 2017 $300,000 would be incurred for direct labor and $180,000 for overhead. These estimates are the same estimates as the previous year. The following information is presented to you:
Inventories January 1, 2017 December 31, 2017
Direct materials $10,000 $14,000
Work in process 8,000 * ?
Finished goods 5,000 3,000
* Job A was started in 2016 but not finished as of December 31, 2016.
During 2017 three jobs worked on, incurring the following costs:
Job A Job B Job C
Materials $6,000 $7,000 $4,000
Labor 10,000 12,000 2,000
Applied overhead ? ? ?
Jobs A and B were completed by December 31, 2017. Job C was not finished by December 31, 2017.
The actual overhead for 2017 was $13,000.
Required: 1. Set up appropriate
(1) inventory T-accounts and
(2) individual job cost sheets for jobs A, B, and C. Be sure to include any beginning balances for 2017.
2. Compute the predetermined overhead rate for 2017.
3. Post all appropriate journal entry dollar amounts for 2017 to both the summary T-accounts and the individual cost sheets.
4. Compute the Cost of goods manufactured for 2017.
5. Compute the December 31, 2017 balance, work in process.
6. Compute the Over (under) applied overhead for 2017.
7. Compute the Unadjusted Cost of goods sold for 2017 (i.e., unadjusted for under/overapplied overhead).
8. Compute the Adjusted Cost of goods sold.
9. Explain what bothered you about the way in which you adjusted the cost of goods sold?