Costly Manufacturing uses a job order cost accounting system. On Oct 1, the company has a balance in Work in Process Inventory of $6,500 and two jobs in process: Job No. 329, $4,000 and Job No. 330, $2,500. During Oct, a summary of source documents reveals the following:
For Materials Requisition Slips Labor Time Tickets
Job No. 329 $ 2,500 $ 8,400
Job No. 330 3,600 3,400
Job No. 331 4,400 3,200
Job No. 332 3,000 3,000
General Use 1,000 1,500
$14,500 $19,500
Costly Manufacturing applies manufacturing overhead to jobs at an overhead rate of 60% of direct labor cost. Job No. 329 is completed during the month.
Instructions
(a) Prepare summary journal entries to record the requisition slips, time tickets, the assignment of manufacturing overhead to jobs, and the completion of Job No. 329. Show computations.
(b) Answer the following questions.
1. What is the balance in Work in Process Inventory at Oct 31?
2. If Costly Manufacturing incurred $8,000 of manufacturing overhead in addition to indirect materials and indirect labor, was overhead over- or underapplied in Oct and by how much?
3. Without regard to your answer in (2) above, assume manufacturing overhead was under applied in Oct. How would this amount be reported in the company's monthly financial statements at Oct 31?