Journal Entries and Accounting for Overhead
Watkins Machinery Company uses a normal job costing system. The company has the following partial trial balance information for March, the last month of its fiscal year:
Materials inventory (X, $9,000; Y, $6,000; Indirect
materials, $15,000) $ 30,000
Work-in-process inventory (this is Job 101) 15,600
Finished goods inventory (this is Job 100) 26,000
These transactions relate to the month of March:
Purchased direct materials and indirect materials with the following summary of receiving reports:
Material X $ 30,000
Material Y 30,000
Indirect materials 15,000
Total $ 75,000
Issued direct materials and indirect materials with this summary of requisitions:
Job 101 Job 102 Total
Material X $ 15,000 $ 9,000 $ 24,000
Material Y 12,000 3,000 15,000
Subtotal $ 27,000 $ 12,000 $ 39,000
Indirect materials 24,000
Total $ 63,000
Factory labor incurred is summarized by these time tickets:
Job 101 $ 31,200
Job 102 20,800
Indirect labor 15,000
Total $ 67,000
Factory utilities, factory depreciation, and factory insurance incurred is summarized as follows:
Utilities $ 1,500
Depreciation 45,000
Insurance 7,500
Total $ 54,000
e. Factory overhead costs were applied to jobs at the predetermined rate of $15 per machine hour. Job 101 incurred 5,400 machine hours; Job 102 used 3,600 machine hours
f. Job 101 was completed; Job 102 was still in process at the end of March.
g. Job 100 and Job 101 were shipped to customers during March. Both jobs had gross margins of 20% based on manufacturing cost.
h. The company closed the overapplied or underapplied overhead to the Cost of Goods Sold account at the end of March.
Required: 2. Compute the ending balance of the Work-in-process inventory account. Compute the ending balance of the Work-in-process inventory account. Direct materials Direct labor Factory overhead applied Total ending balance 3. Compute the overhead variance and indicate whether it is overapplied or underapplied Compute the overhead variance and indicate whether it is overapplied or underapplied. Actual factory overhead Indirect materials Indirect labor Utilities Depreciation Insurance Less: Applied factory overhead Underapplied factory overhead 4. Close the overhead variance to the Cost of goods sold account. Journal entry worksheet To record the disposition of underapplied factory overhead by closing the Factory overhead account to the Cost of goods sold account. Note: Enter debits before credits. Transaction General Journal Debit Credit