The Collins Company Uses a Job-Order Costing System and Applies $\quad$

question 93

Essay

The Collins Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of materials used in production.At the beginning of the most recent year,the following estimates were made as a basis for computing the predetermined overhead rate for the year:
Manufacturing overhead cost: $\quad$ $\quad$$\$ 200,000$
Direct materials cost: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\$ 160,000$
The following transactions took place during the year (all purchases and services were acquired on account):
a.) Raw materials purchased: $86,000.
b.) Raw materials requisitioned for use in production (all direct materials): $98,000.
c.) Utility costs incurred in the factory: $15,000.
d.) Salaries and wages incurred as follows:
$\begin{array}{l}\begin{array}{lll} \text { Direct materials} \\ \text { Indirect labour: } \\\text { Selling and administrative salaries: } \\\end{array}\begin{array}{lll}\$ 175,000 \\\$ 70,000 \\\$ 125,000\end{array}\end{array}$
e.) Maintenance costs incurred in the factory: $15,000.
f.) Advertising costs incurred: $89,000.
g.) Depreciation recorded for the year: $80,000, of which 80% relates to factory assets and the remainder relates to selling and administrative assets.
h.) Rental cost incurred on buildings: $70,000 (75% of the space is occupied by the factory, and 25% is occupied by sales and administration).
i.) Miscellaneous selling and administrative costs incurred: $11,000.
j.) Manufacturing overhead cost was applied to jobs as per company policy.
k.) Cost of goods manufactured for the year: $500,000.
l.) Sales for the year (all on account): $1,000,000. These goods cost $600,000 to manufacture.
Required:
Prepare journal entries to record the information above. Key your entries by the letters a through l.

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Definitions:

Process Costing System

A financial recording method for allocating expenses to identical items that are manufactured in bulk through an uninterrupted process.

Weighted-Average Method

A costing method that assigns the average cost of goods available for sale to both ending inventory and cost of goods sold, weighting by the number of units.

Direct Labor Cost

The total cost of all labor directly involved in the production of goods or services, which can be easily traced to the product.

Equivalent Units

A technique in cost accounting used to allocate costs to partially completed goods, expressed in terms of fully completed units.