Here is information for Toyama Co., that produces and sells a customized machine for health clubs. The company received a job order and the following is information related to the Job Order.
During a period Toyama Co. incurred advertising expense for $45,000. There was no beginning inventory for raw material and company purchased $60,000, of which $40,000 went to WIP. Direct labor used in production was $13,000, which is equivalent of 250 labor hours.
Toyama incurred utility costs $4,500, a rent $20,000, and depreciation of machine $15,000 for its factory. Indirect materials used in the production were $23,000 and indirect labors were $17,500.
Beginning inventory in WIP was $10,000 and ending WIP was $40,000. Beginning inventory in FG was $3,000 and ending inventory in FG was $5,000.
The company sold the product for $200,000 and shows the following journal entries.
Account Receivable $ 200,000
Sales Revenue $ 200,000
COGS $ 110,000
FG $110,000
Using a T account presentation for Toyama Co.,
(1) show how costs flows in Job Order Costing based on the above information.
(2) Toyama uses a labor hour as an allocation base for overhead. How much was the Overhead allocated to WIP and what was an overhead allocation rate?
(3) Show Cost of Goods Manufactured, (4) at the end of period the accountant has to close the overhead account. Show whether it is over or under applied and an adjusting entry using COGS. Show all of your calculations.