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Homework answers / question archive / 1) Issuance of materials On May 7, Calypso Company purchased on account 5,000 units of raw materials at $4 per unit

1) Issuance of materials On May 7, Calypso Company purchased on account 5,000 units of raw materials at $4 per unit

Management

1) Issuance of materials

  • On May 7, Calypso Company purchased on account 5,000 units of raw materials at $4 per unit. During May, raw materials were requisitioned for production as follows: 3,750 units for Job 200 at $4 per unit and 740 units for Job 305 at $2.5 per unit. Journalize the entry on March 7 to record the purchase and on March 30 to record the requisition from the materials storeroom.

Direct labor costs

  • During May, Calypso Company accumulated 1,250 hours of direct labor costs on Job 200 and 1,500 hours on Job 305. The total direct labor was incurred at a rate of $14 per direct labor hour for Job 200 and $12 per direct labor hour for Job 305. Journalize the entry to record the flow of labor costs into production during May.

Factory overhead costs

  • During June, Calypso Company incurred factory overhead costs as follows: indirect materials, $8,800; indirect labor, $6,600; utilities cost, $4,800; and factory depreciation, $9,000. Journalize the entry to record the factory overhead incurred during June.

Applying factory overhead

Calypso Company estimates that total factory overhead costs will be $310,000 for the year. Direct labor hours are estimated to be 40,000. For Calypso Company,

  • Determine the predetermined factory overhead rate using direct labor hours as the activity base.
  • Determine the amount of factory overhead applied to jobs 200 and 305 in May using the data on direct labor hours from Exercise 2.
  • Prepare the journal entry to apply factory overhead to both jobs in August according to the predetermined overhead rate.

Job costs

  • At the end of May, Calypso Company had completed Job 200 and Job 305. Job 200 is for 2,390 units, and Job 305 is for 2,053 units.

Using the data from Exercises 1, 2 and 4,

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1) Journal Entries for Issuance of Material:    
Date Account Titles and Explanations Debit ($) Credit ($)
May-07 Materials (5,000*$4) 20,000  
  Accounts Payable   20,000
  (To record the purchases)    
       
May-31 Work in Process [(3,750*$4) + (740*$2.50)] 16,850  
  Materials   16,850
  (To record the requisitions from storeroom)    

 

2) Journal Entry to record the flow of labor costs into Production during May:    
Account Titles and Explanation Debit Credit
Work In Progress 35,500  
Wages Payable   35,500

Workings:

1. Total Labor Cost for Job 200 = Labor Hours * Direct labor rate

= 1,250*$14

= $17,500

2.

Total Labor Cost for Job 305 = Labor Hours * Direct labor rate

= 1,500*$12

= $18,000

3. Labor Cost = $17,500 + $18,000

= $35,500

 

3) Journal Entry to record Factory Overhead incurred during June:
Account Title Debit Credit
Factory Overhead $29,200   
Materials   $8,800 
Wages Payable   $6,600 
Utilities Payable   $4,800 
Accumulated Depreciation-Factory   $9,000 

 

4) Predetermined Overhead Rate:    
Predetermined factory overhead rate = Estimated overhead cost / Estimated direct labor hours   7.7500
Predetermined factory overhead rate = $310,000/40,000    
Predetermined factory overhead rate = $7.75 per direct labor hour    
     
Amount of Factory Overhead Applied to Jobs 200 and 305 in May:    
Jobs 200 $9,688    =1250*7.75
Jobs 305 $11,625   =1500*7.75
  Journal Entry to apply Factory Overhead to Both Jobs:    
Date Account Titles and Explanation Debit Credit
May-31 Work in process ($9,688+$11,625) $21,313   
  Factory Overhead   $21,313 
  (To record apply factory overhead)    

 

5) Jobs 200 305
Completed Job 2390 2053
Raw Material requisitoned (3750 units @ $4) for Job 200 and (..0@$2.5 ) for job 305 $15,000.00  1850
Direct Labor (1250 Direct Labor Hours @ $14) for Job 200 and (1500 hours @ $12) $17,500.00  $18,000.00 
Manufacturing Overhead (1250 Direct Labor Hours @$7.75) for Job 200 and(1500 Direct Labor H..s@$7.75) ofr Job 305 $9,687.50  $11,625.00 
Balance on the job cost sheet $42,187.50  $31,475.00 
     
     
Jobs 200 305
Completed Job 2390 2053
Balance on the job cost sheet $42,187.50  $31,475.00 
Cost per unit $17.65  $15.33 
     
Workings:    
Predetermined Rater=(Estimated Overhead cost/Estimated Labor Hours)($310000/40000) 7.75  

 

 

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