Tracing Costs in a Job Company
The following transactions occurred in January at Dungan Cabinetry, a furniture maker that uses job costing:
1. Purchased $53,700 in materials on account.
2. Issued $1,500 in supplies from the materials inventory to the production department.
3. Paid for the materials purchased in (1).
4. Issued $25,500 in direct materials to the production department.
5. Incurred wage costs of $42,000, which were debited to Payroll, a temporary account. Of this amount, $13,500 was withheld for payroll taxes and credited to Payroll Taxes Payable. The remaining
$28,500 was paid in cash to the employees. See transactions (6) and (7) for additional information about Payroll.
6. Recognized $21,000 in fringe benefit costs, incurred as a result of the wages paid in (5). This
$21,000 was debited to Payroll and credited to Fringe Benefits Payable.
7. Analyzed the Payroll account and determined that 60 percent represented direct labor;
30 percent, indirect manufacturing labor; and 10 percent, administrative and marketing costs.
8. Paid for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant totaling $32,400.
9. Applied overhead on the basis of 175 percent of direct labor costs.
10. Recognized depreciation of $17,250 on manufacturing property, plant, and equipment.
Required
a. Prepare journal entries to record these transactions.
b. The following balances appeared in the accounts of Dungan Cabinetry:
|
Beginning |
Ending |
Materials Inventory |
$55,575 |
— |
Work In Process Inventory |
12,375 |
— |
Finished Goods Inventory |
62,250 |
$49,800 |
Cost of Goods Sold |
— |
98,775 |
Prepare T accounts to show the flow of costs during the period.