CHAPTER 2

JOB ORDER COSTING

CHAPTER LEARNING OBJECTIVES

1. Describe cost systems and the flow of costs in a job order system. Cost accounting involves the procedures for measuring, recording, and reporting product costs. From the data accumulated, companies determine the total cost and the unit cost of each product. The two basic types of cost accounting systems are process cost and job order cost. In job order costing, companies first accumulate manufacturing costs in three accounts: Raw Materials Inventory, Factory Labor, and Manufacturing Overhead. They then assign the accumulated costs to Work in Process Inventory and eventually to Finished Goods Inventory and Cost of Goods Sold.

2. Use a job cost sheet to assign costs to Work in Process. A job cost sheet is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job. Job cost sheets constitute the subsidiary ledger for the Work in Process Inventory control account.

3. Demonstrate how to determine and use the predetermined overhead rate. The predetermined overhead rate is based on the relationship between estimated annual overhead costs and estimated annual operating activity. This is expressed in terms of a common activity base, such as direct labor cost, direct labor hours, or machine hours. Companies use this rate to assign overhead costs to Work in Process and to specific jobs.

4. Prepare entries for manufacturing and service jobs completed and sold. When jobs are completed, companies debit the cost to Finished Goods Inventory and credit it to Work in Process Inventory. When a job is sold the entries are: (a) Debit Cash or Accounts Receivable and credit Sales Revenue for the selling price, and (b) Debit Cost of Goods Sold and credit Finished Goods Inventory for the cost of the goods.

5. Distinguish between under- or overapplied manufacturing overhead. Underapplied manufacturing overhead indicates that the overhead assigned to Work in Process is less than the overhead incurred. Overapplied overhead indicates that the overhead assigned to Work in Process is greater than the actual overhead costs incurred.

TRUE-FALSE STATEMENTS

1. Cost accounting is primarily concerned with accumulating information about product costs.

2. A job order cost system is most appropriate when a large volume of uniform products is produced.

3. A process cost system is appropriate for similar products that are continuously mass produced.

4. The perpetual inventory method cannot be used in a job order cost system.

5. A job order cost system and a process cost system are two alternative methods for accumulating product costs.

6. A job order cost system identifies costs with a particular job rather than with a set time period.

7. A company may use either a job order cost system or a process cost system, but not both.

8. Raw Materials Inventory, Factory Labor, and Manufacturing Overhead are all control accounts in the general ledger when a job order cost accounting system is used.

9. Accumulating and assigning manufacturing costs are two important activities in a job order cost system.

10. Recording the acquisition cost of raw materials is a part of accumulating manufacturing costs.

11. Manufacturing costs are generally incurred in one period and recorded in a subsequent period.

12. The Purchases account is credited for all returns and allowances of raw materials purchases

13. When raw materials are received, there is no effort at this point to associate the cost of materials with specific jobs.

14. When raw materials are purchased, the Work in Process Inventory account is debited.

15. Factory labor should be assigned to selling and administrative expenses on a proportionate basis.

16. Benefits and payroll taxes associated with factory workers should be accumulated as a part of Factory Labor.

17. Job order cost sheets constitute the subsidiary ledger of the control account Work in Process Inventory.

18. In a job order cost system, each entry to the Work in Process Inventory account should be accompanied by a posting to one or more job cost sheets.

19. Direct materials requisitioned from the storeroom should be charged to the Work in Process Inventory account and the job cost sheets for the individual jobs on which the materials were used.

20. Manufacturing overhead is the only product cost that can be assigned to jobs as soon as the costs are incurred.

21. There should be a separate job cost sheet for each job.

22. Actual manufacturing overhead costs are assigned to each job by tracing each overhead cost to a specific job.

23. The calculation for the predetermined overhead rate is estimated annual overhead costs divided by an estimated volume of annual operating activity.

24. Actual manufacturing overhead costs should be charged to the Work in Process Inventory account as they are incurred.

25. Finished Goods Inventory is decreased for the cost of jobs completed during a period.

26. Finished Goods Inventory is charged for the cost of jobs completed during a period.

27. When goods are sold, the Cost of Goods Sold account is debited and Work in Process Inventory account is credited.

28. Total manufacturing costs for a period consists of the cost of direct materials used, the cost of direct labor incurred, and the manufacturing overhead applied during the period.

29. Overapplied overhead means that actual manufacturing overhead costs were greater than the manufacturing overhead costs applied to jobs.

30. At the end of the year, the amount of the overapplied overhead is usually credited to Cost of Goods Sold.

31. A cost accounting system consists of manufacturing cost accounts that are fully integrated into the general ledger of a company.

32. The cost of raw materials purchased is credited to Raw Materials Inventory when materials are received.

33. Requisitions for direct materials are posted daily to the individual job cost sheets.

34. The predetermined overhead rate is based on the relationship between the estimated annual overhead costs and the estimated annual operating activity expressed in terms of a common activity base.

35. At the end of the year, underapplied overhead is usually credited to Cost of Goods Sold.

MULTIPLE CHOICE QUESTIONS

36. Which of the following is one of the purposes of cost accounting?

a. It involves measuring product costs.

b. It involves the determination of company profits.

c. It requires GAAP to be applied.

d. It requires cost minimizing principles.

37. A major purpose of cost accounting is to

a. classify all costs as operating or nonoperating.

b. measure, record, and report period costs.

c. provide information to stockholders for investment decisions.

d. measure, record, and report product costs.

38. The two basic types of cost accounting systems are

a. job order cost and job cost accumulation systems.

b. job order cost and process cost systems.

c. process cost and batch cost systems.

d. job order cost and batch cost systems.

39. A process cost system would most likely be used by a company that makes

a. music videos.

b. repairs to electric bicycles.

c. ramen noodles.

d. college graduation announcements.

40. Which of the following would be accounted for using a job order cost system?

a. The production of computer docking stations.

b. The production of electric cars.

c. The refining of petroleum.

d. The construction of a new campus dormitory.

41. Process costing is used when

a. the production process is continuous.

b. production is aimed at filling a specific customer order.

c. dissimilar products are involved.

d. costs are to be assigned to specific jobs.

42. Process costing is not used when

a. similar goods are being produced.

b. large volumes are produced.

c. jobs have distinguishing characteristics.

d. a series of connected manufacturing processes is necessary.

43. An important feature of a job order cost system is that each job

a. must be similar to previous jobs completed.

b. has its own distinguishing characteristics.

c. must be completed before a new job is accepted.

d. consists of one unit of output.

44. As of December 31, 2022, Stand Still Industries had $2,500 of raw materials inventory. At the beginning of 2022, there was $2,000 of materials on hand. During the year, the company purchased $375,000 of materials; however, it paid for only $312,500. How much inventory was requisitioned for use on jobs during 2022?

a. $312,000

b. $374,500

c. $375,500

d. $313,000

Ex. 161

The manufacturing operations of Beatly, Inc. had the following inventory balances for the month of January:

January 1 January 31

Raw Materials $12,000 $13,000

Work in Process 21,000 23,000

Finished Goods 14,000 12,000

Beatly transferred $270,000 of completed goods out of Work in Process Inventory during January.

Instructions

Compute the cost of goods sold for January.

Ex. 162

A selected list of accounts used by Cline Manufacturing Company follows:

Code Code

A Cash F Accounts Payable

B Accounts Receivable G Factory Labor

C Raw Materials Inventory H Manufacturing Overhead

D Work in Process Inventory I Cost of Goods Sold

E Finished Goods Inventory J Sales Revenue

Cline Manufacturing Company uses a job order system and maintains perpetual inventory records.

Instructions

Place the appropriate code letter in the columns indicating the appropriate account(s) to be debited and credited for the transactions listed below.

———————————————————————————————————————————

Account(s) Account(s)

Transactions Debited Credited

———————————————————————————————————————————

1. Raw materials were purchased on account.

———————————————————————————————————————————

2. Issued a check to Dixon Machine Shop for

repair work on factory equipment.

———————————————————————————————————————————

3. Direct materials were requisitioned for Job 280.

———————————————————————————————————————————

4. Factory labor was paid as incurred.

———————————————————————————————————————————

5. Recognized direct labor and indirect labor used.

———————————————————————————————————————————

6. The production department requisitioned indirect

materials for use in the factory.

———————————————————————————————————————————

7. Manufacturing overhead was applied to production

based on a predetermined overhead rate of $8/ labor hour.

———————————————————————————————————————————

8. Goods that were completed were transferred to

finished goods inventory.

———————————————————————————————————————————

9. Goods costing $80,000 were sold for $105,000

on account.

———————————————————————————————————————————

10. Paid for raw materials purchased previously

on account.

———————————————————————————————————————————

Ex. 163

Finn Manufacturing Company uses a job order cost system and keeps perpetual inventory records. Prepare journal entries to record the following transactions during the month of June.

June 1 Purchased raw materials for $20,000 on account.

8 Raw materials requisitioned by production:

Direct materials $8,000

Indirect materials 1,000

15 Paid factory utilities, $2,100 and repairs for factory equipment, $8,000.

25 Incurred $108,000 of factory labor.

25 Time tickets indicated the following:

Direct labor (7,000 hrs. × $12 per hr.) = $ 84,000

Indirect labor (3,000 hrs. × $8 per hr.) = 24,000

$108,000

Ex. 163 (Cont.)

25 Applied manufacturing overhead to production based on a predetermined overhead rate of $7 per direct labor hour worked.

28 Goods costing $18,000 were completed in the factory and were transferred to finished goods inventory.

30 Goods costing $15,000 were sold for $20,000 on account.

Ex. 164

Selected accounts of Kosar Manufacturing Company at year end appear below:

RAW MATERIALS INVENTORY WORK IN PROCESS INVENTORY

(a) 40,000 (d) 25,000 (d) 25,000 (g) 140,000

(e) 80,000

(f) 100,000

FINISHED GOODS INVENTORY COST OF GOODS SOLD

(g) 140,000 (h) 120,000 (h) 120,000

FACTORY LABOR MANUFACTURING OVERHEAD

(b) 110,000 (e) 110,000 (c) 75,000 (f) 100,000

(e) 30,000

Instructions

Explain the probable transaction that took place for each of the items identified by letters in the accounts. For example:

(a) Raw materials costing $40,000 were purchased.

Ex. 165

Sardin Company begins the month of March with $17,000 of Work in Process Inventory from Job 324. Information from job cost sheets shows the following additional costs assigned during March, April, and May of 2022:

Manufacturing Costs Assigned

Job No. March April May

324 $26,000

325 20,000 $28,000 $15,000

326 41,000 11,000

327 16,000 39,000

328 34,000 51,000

Job 324 was completed in March. Jobs 325 and 327 were completed in May, and Job 326 was completed in April. Jobs are sold during the month after completion. Total revenue for jobs sold during the 3-month period is $145,000.

Ex. 165 (Cont.)

Instructions

Calculate the balances of the Work in Process Inventory and Finished Goods Inventory accounts at the end of May.

Ex. 166

The gross earnings of factory workers for Dinkel Company during the month of January are $400,000. The employer's payroll taxes for the factory payroll are $80,000. Of the total accumulated cost of factory labor, 75% is related to direct labor and 25% is attributable to indirect labor.

Instructions

(a) Prepare the entry to record the factory labor costs for the month of January.

(b) Prepare the entry to assign factory labor to production.

(c) Prepare the entry to assign manufacturing overhead to production, assuming the predetermined overhead rate is 125% of direct labor cost.

Ex. 167

Foster Manufacturing uses a job order cost system. On April 1, the company has Work in Process Inventory of $7,600 and two jobs in process: Job No. 221, $3,600, and Job No. 222, $4,000. During April, a summary of source documents reveals the following:

For Materials Requisition Slips Labor Time Tickets

Job No. 221 $1,200 $2,100

222 1,700 2,200

223 2,400 2,900

224 2,600 2,800

General use 600 400

Totals $8,500 $10,400

Foster applies manufacturing overhead to jobs at an overhead rate of 70% of direct labor cost. Job No. 221 is completed during the month.

Instructions

(a) Prepare summary journal entries to record the raw materials requisitioned, factory labor used, the assignment of manufacturing overhead to jobs, and the completion of Job No. 221.

(b) Calculate the balance of the Work in Process Inventory account at April 30.

Ex. 168

Manufacturing cost data for Dolan Company, which uses a job order cost system, are presented below:

Case A Case B

Direct Materials Used (a) $103,000

Direct Labor $ 70,000 150,000

Manufacturing Overhead Applied 63,000 (d)

Total Manufacturing Costs 240,000 (e)

Work in Process Inventory, 1/1/22 (b) 45,000

Total Cost of Work in Process 300,000 (f)

Work in Process Inventory, 12/31/22 (c) 40,000

Cost of Goods Manufactured 205,000 (g)

Instructions

Indicate the missing amount for each letter. Assume that overhead is applied on the basis of direct labor cost and that the rate is the same for both cases.

Ex. 169

Fort Corporation had the following transactions during its first month of operations:

1. Purchased raw materials on account, $85,000.

2. Raw materials of $30,000 were requisitioned to the factory. An analysis of the materials requisition slips indicated that $6,000 was classified as indirect materials.

3. Factory labor costs incurred were $175,000 of which $145,000 pertained to factory wages payable and $30,000 pertained to employer payroll taxes payable.

4. Time tickets indicated that $145,000 was direct labor and $30,000 was indirect labor.

5. Overhead costs incurred on account were $198,000.

6. Manufacturing overhead was applied at the rate of 150% of direct labor cost.

7. Goods costing $115,000 are still incomplete at the end of the month; the other goods were completed and transferred to Finished Goods Inventory.

8. Finished Goods Inventory with a cost of $100,000 was sold on account for $130,000.

Ex. 169 (Cont.)

Instructions

Journalize the above transactions for Fort Corporation.

Ex. 170

Lando Company reported the following amounts for 2022:

Raw materials purchased $85,000

Beginning raw materials inventory 5,200

Ending raw materials inventory 4,500

Beginning finished goods inventory 7,600

Ending finished goods inventory 8,000

Direct labor used 20,000

Manufacturing overhead costs applied 30,000

Beginning work in process inventory 6,100

Ending work in process inventory 6,300

Ex. 170 (Cont.)

Instructions

Calculate (a) the cost of materials used in production and (b) total manufacturing costs.

Ex. 171

A job cost sheet of Fugate Company is given below.

Instructions

(1) What is the predetermined manufacturing overhead rate?

(2) What are the total cost and the unit cost of the completed job?

(b) Prepare the entry to record the completion of the job.

Ex. 172

At May 31, 2022, the accounts of Kuhlmann Manufacturing Company show the following.

1. May 1 inventories—finished goods $12,600, work in process $14,700, and raw materials $8,200.

2. May 31 inventories—finished goods $8,500, work in process $22,900, and raw materials $7,100.

3. Debit postings to Work in Process Inventory were: direct materials $77,400, direct labor $50,000, and manufacturing overhead applied $45,000.

4. Sales totaled $225,000.

Instructions

(a) Prepare a condensed cost of goods manufactured schedule.

(b) Prepare an income statement for May through gross profit.

Ex. 173

Watson Manufacturing Company employs a job order cost system and keeps perpetual inventory records. The following transactions occurred in the first month of operations:

1. Direct materials requisitioned during the month:

Job 101 $20,000

Job 102 16,000

Job 103 24,000

$60,000

2. Direct labor incurred and charged to jobs during the month was:

Job 101 $32,000

Job 102 28,000

Job 103 20,000

$80,000

3. Manufacturing overhead was applied to jobs using a predetermined overhead rate based on 75% of direct labor costs.

4. Actual manufacturing overhead costs incurred during the month amounted to $66,000.

5. Job 101 consisting of 1,000 units and Job 103 consisting of 200 units were completed during the month.

Instructions

(a) Prepare journal entries to record the above transactions.

1. How much manufacturing overhead was applied to Job 103 during the month?

2. What is the unit cost of Jobs 101 and 103?

3. What is the balance in Work in Process Inventory at the end of the month?

4. By what amount was manufacturing overhead was under- or overapplied during the month?

Ex. 174

Graham Manufacturing is a small manufacturer that uses machine hours as its activity base for assigning overhead costs to jobs. The company estimated the following amounts for 2022 for the company and for Job 62:

Company Job 62

Direct materials $60,000 $4,500

Direct labor $25,000 $2,500

Manufacturing overhead costs $72,000

Machine hours 90,000 1,350

During 2022, the actual machine hours totaled 95,000, and actual overhead costs were $71,000.

Ex. 174 (Cont.)

Instructions

(a) Compute the predetermined overhead rate.

(b) Compute the total manufacturing costs for Job 62.

(c) How much overhead is over or underapplied for the year for the company? State amount and whether it is over- or underapplied.

(d) If Graham Manufacturing sells Job 62 for $14,000, compute the gross profit.

Ex. 175

The following inventory information is available for Ricci Manufacturing Corporation for the year ended December 31, 2022:

Beginning Ending

Inventories:

Raw materials $17,000 $19,000

Work in Process 9,000 14,000

Finished goods 11,000 8,000

Total $37,000 $41,000

In addition, the following transactions occurred in 2022:

1. Raw materials purchased on account, $75,000.

2. Incurred factory labor, $80,000, all is direct labor.

3. Incurred the following overhead costs during the year: utilities $6,800, depreciation on manufacturing machinery $8,000, manufacturing machinery repairs $9,200, factory insurance $9,000 (Credit Accounts Payable and Accumulated Depreciation).

4. Assigned $80,000 of factory labor to jobs.

5. Applied $36,000 of overhead to jobs.

Instructions

(a) Journalize the above transactions.

(b) From an analysis of the accounts, compute the following:

1. Raw materials used.

2. Completed jobs transferred to finished goods inventory.

3. Cost of goods sold.

4. Under- or overapplied overhead.

Ex. 176

Builder Bug Company allocates manufacturing overhead at $9 per direct labor hour. Job A45 required 4 boxes of direct materials at a cost of $30 per box and took employees 14 hours to complete. Employees earn $15 per hour.

Instructions

Compute the total cost of Job A45.

Ex. 177

Job cost sheets for Howard Manufacturing are as follows:

Job No 210 Quantity 1,500

Manufacturing

Date Direct Materials Direct Labor Overhead

July 1 9,000 8,000 12,000

8 8,500

10 10,000

15 5,500

25 20,000

Job No 211 Quantity 1,200

Manufacturing

Date Direct Materials Direct Labor Overhead

July 1 5,000 6,000 9,000

10 9,000

15 8,000

20 7,000

27 12,000

Instructions

1. What was the balance in Work in Process Inventory on July 1 if these were the only unfinished jobs?

2. What was the predetermined overhead rate in June if overhead was applied on the basis of direct labor cost?

3. If July is the start of a new fiscal year and the overhead rate is 20% higher than in the preceding year, how much overhead should be applied to Job 210 in July?

4. Assuming Job 210 is complete, what is the total and unit cost of the job?

5. Assuming Job 211 is the only unfinished job at July 31, what is the balance in Work in Process Inventory on this date?

(b) Journalize the summary entries to record the assignment of costs to the jobs in July. (Note: Make one entry in total for each manufacturing cost element.)

Ex. 178

Garner Company begins operations on July 1, 2022. Information from job cost sheets shows the following:

Manufacturing Costs Assigned

Job No. July August September

100 $12,000 $8,800

101 10,800 9,700 $12,000

102 5,000

103 11,800 6,000

104 5,800 7,000

Job 102 was completed in July. Job 100 was completed in August, and Jobs 101 and 103 were completed in September. Each job was sold for 60% above its cost in the month following completion.

Ex. 178 (Cont.)

Instructions

(a) Compute the balance in Work in Process Inventory at the end of July.

(b) Compute the balance in Finished Goods Inventory at the end of September.

(c) Compute the gross profit for August.

Ex. 179

The accounting records of Roland Manufacturing Company include the following information:

Dec. 31 Jan. 1

Work in Process Inventory $ 20,000 $ 50,000

Finished Goods Inventory 120,000 150,000

Direct materials used 350,000

Direct labor 160,000

Selling expenses 125,000

Manufacturing overhead is applied at a rate of 150% of direct labor cost.

Instructions

1. What is the total of the debits to Work in Process Inventory during the year?

2. What is the amount transferred to Finished Goods Inventory during the year?

3. What is Cost of Goods Sold?

Ex. 180

Grant Marwick and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concerning the three audit jobs conducted during November.

Rondelli Preston Lopez

Direct materials $900 $600 $300

Auditor labor costs $5,900 $6,600 $3,700

Auditor hours 66 88 45

Overhead costs are applied to jobs on the basis of auditor hours and the predetermined overhead rate is $50 per auditor hour. The Rondelli job is the only incomplete job at the end of November. Actual overhead for the month was $10,500.

Instructions

(a) Determine the cost of each job.

(b) Indicate the balance of the Work in Process Inventory account at the end of November.

(c) Calculate the ending balance of the Operating Overhead account for November.

Ex. 181

Gallagher Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $425,000 for the year, and machine usage is estimated at 125,000 hours.

For the year, $450,000 of overhead costs are incurred and 130,000 hours are used.

Instructions

(a) Compute the manufacturing overhead rate for the year.

(b) What is the amount of under - or overapplied overhead at December 31?

(c) Assuming the under - or overapplied overhead for the year is not allocated to inventory accounts, prepare the adjusting entry to assign the amount to cost of goods sold

Ex. 182

Fancy Decorating uses a job order costing system to collect the costs of its interior decorating business. Each client's consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below are data for the current year.

Estimated overhead $880,000

Actual overhead $910,000

Estimated decorator hours 40,000

Actual decorator hours 41,000

The company uses Operating Overhead in place of Manufacturing Overhead.

Instructions

(a) Compute the predetermined overhead rate.

(b) Prepare the entry to apply the overhead for the year.

(c) Determine whether the overhead was under - or overapplied and by what amount.

Ex. 183

Martin Company applies manufacturing overhead based on direct labor hours. Information concerning manufacturing overhead and labor for the year follows:

Actual manufacturing overhead $80,000

Estimated manufacturing overhead $75,000

Direct labor hours incurred 4,800

Direct labor hours estimated 5,000

Instructions

Compute (a) the predetermined overhead rate and (b) the amount of applied manufacturing overhead.

Ex. 184

Landis Company uses a job order cost system in each of its two manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department A and machine hours in Department B. In establishing the predetermined overhead rates for 2022, the following estimates were made for the year:

Department

A B

Manufacturing overhead $2,100,000 $1,400,000

Direct labor cost 1,500,000 1,200,000

Direct labor hours 100,000 100,000

Machine hours 200,000 400,000

Ex. 184 (Cont.)

During January, the job cost sheet showed the following costs and production data:

Department

A B

Direct materials used $195,000 $128,000

Direct labor cost 100,000 110,000

Manufacturing overhead incurred 130,000 135,000

Direct labor hours 8,000 8,400

Machine hours 16,000 34,000

Instructions

(a) Compute the predetermined overhead rate for each department.

(b) Compute the total manufacturing cost assigned to jobs in January in each department.

(c) Compute the balance in the Manufacturing Overhead account at the end of January and indicate whether overhead is over- or underapplied.

Ex. 185

Edwards Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $1,800,000 for the year, and machine usage is estimated at 200,000 hours.

In January, $186,000 of overhead costs are incurred and 22,000 machine hours are used. For the remainder of the year, $1,940,000 of additional overhead costs are incurred and 214,000 additional machine hours are worked.

Instructions

(a) Compute the predetermined manufacturing overhead rate for the year.

(b) What is the amount of over- or underapplied overhead at January 31?

(c) What is the amount of over- or underapplied overhead at December 31?

Ex. 186

Klinger Company estimates that annual manufacturing overhead costs will be $4,800,000 for 2022. The actual overhead costs at the end of 2022 are $4,980,000. Activity base information for 2022 follows:

Activity Base Estimated Actual

Direct Labor Cost $3,000,000 $3,150,000

Direct Labor Hours 200,000 212,000

Machine Hours 150,000 152,000

Instructions

(a) Compute the predetermined overhead rate for each activity base.

(b) Compute the amount of overhead applied in 2022 for each activity base.

(c) Compute the amount of under- or overapplied overhead for 2022 for each activity base.

Ex. 187

Jensen Manufacturing Company makes specialty tools. In January, Jensen incurs manufacturing costs of $13,000,000 for direct material, direct labor, and overhead. 20% of the total costs represents overhead applied. The overhead rate is $1 for every $2 of direct labor costs incurred. Inventory balances were:

January 1 January 31

Raw Materials $300,000 $500,000

Work in Process 600,000 400,000

Finished Goods 400,000 200,000

At the end of January, there was $1,000 of overapplied overhead.

Instructions

(a) Determine the cost of raw materials purchased in January.

(b) Prepare a Cost of Goods Manufactured Schedule for January 2022.

(c) Compute Cost of Goods Sold for January.

Ex. 188

The following information is available for Marks Company at December 31, 2022:

1. Inventory balance Beginning of Year End of Year

Finished Goods $14,000 $10,000

Work in Process 6,000 12,000

Raw Materials 10,300 6,500

2. Debit postings to Work in Process Inventory during the year were:

Direct materials $90,000

Direct labor 60,000

Manufacturing overhead applied 75,000

3. Sales totaled $310,000 for the year.

Instructions

(a) Prepare a condensed cost of goods manufactured schedule.

(b) Prepare an income statement for the year through gross profit.