Pincus Corporation, Which Uses a Job-Costing System, Had Two Jobs

question 29

Essay

Pincus Corporation, which uses a job-costing system, had two jobs in process at the start of 20x1: job no. 59 ($95,000) and job no. 60 ($39,500). The following information is available:
· The company applies manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year were anticipated to be $720,000 and 20,000 hours, respectively.
· The company worked on three jobs during the first quarter. Direct materials used, direct labor incurred, and machine hours consumed were:

· Manufacturing overhead during the first quarter included charges for depreciation ($20,000), indirect labor ($50,000), indirect materials used ($4,000), and other factory costs ($108,700).
· Pincus completed job no. 59 and job no. 60. Job no. 59 was sold for cash, producing a gross profit of $24,600 for the firm.
Required:
A. Determine the company's predetermined overhead application rate.
B. Prepare journal entries as of March 31 to record the following. (Note: Use summary entries where appropriate by combining individual job data.)
1. The issuance of direct material to production, and the direct labor incurred.
2. The manufacturing overhead incurred during the quarter.
3. The application of manufacturing overhead to production.
4. The completion of job no. 59 and no. 60.
5. The sale of job no. 59.

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Definitions:

Cost

The value, usually in monetary terms, required to produce, acquire, or maintain a good or service.

Insurance

A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.

Breach of Warranty

A violation of the terms of an express or implied warranty, where the promised standard or quality of a product or service is not met.

Consideration

A fundamental component in contract law that involves something of value exchanged between parties, making the agreement legally binding.