Prepare the entries required to record the sale

Gergia Woods Inc manufactures furniture to customers specifications and uses job order costing. A predetermined overhead rate is used in applying manufacturing overhead to individual jobs. In Dept one, overhead is applied on the basis of machine hours, in department two, on the basis of direct labor hours

 

	Dept 1	Dept 2
Direct Labor Cost	$300000	$225000
Direct Labor hours	20000	15000
Manufacturing Overhead	$420000	$337500
Machine Hours	12000	7500

Production of a batch of custome furniture ordered by City Furniture (job no.58) was started early in the year and completed 3 weeks later oin Jan 29. The records for thisjob show the following cost information.

	Dept 1	Dept 2
Job order City Furniture
Direct Materials cost	$10100	$7600
Direct Labor Cost	$16,500	$11,100
Direct Labor hours	1100	740
Machine hours	750	500

Selected additional information for January as follows:

	Dept 1	Dept 2
Direct Labor Hours-month of January	1600	1200
Machine hours -month of January	1100	600
Manufacturing overhead incurred in January	$39,010	$26,540

 

a. Compute the predetermined overhead rate for each department

b. What is the total cost of the furniture produced for City Furniture

c. Prepare the entries required to record the sale (on account) of the furniture to City Furniture. The sales price of theorder was $147,000

d. determine the over or underapplied  overhead for each department at the end of January

Solution: