Name Javier, Kimberly Anne B.

CA Wk13 Les JO A1
Modern Building Solutions builds portable buildings to clients’ specifications. The firm has two
departments: Parts Fabrication and Assembly. The Parts Fabrication Department designs and cuts the
major components of the building and is highly automated. Th e Assembly Department assembles and
installs the components and this department is highly labor intensive. The Assembly Department
begins work on the buildings as soon as the floor components are available from the Parts Fabrication
Department. In its first month of operations (March 2010), Modern Building Solutions obtained
contracts for three buildings:
Job 1: a 20- by 40-foot storage building
Job 2: a 35- by 35-foot commercial utility building
Job 3: a 30- by 40-foot portable classroom

Modern Building Solutions bills its customers on a cost-plus basis, with profit set equal to 25 percent
of costs. Th e firm uses a job order costing system based on normal costs. Overhead is applied in Parts
Fabrication at a predetermined rate of $100 per machine hour (MH). In the Assembly Department,
overhead is applied at a predetermined rate of $10 per direct labor hour (DLH). The following signifi-
cant transactions occurred in March 2010:
1. Direct material was purchased on account: $80,000.
2. Direct material was issued to the Parts Fabrication Department for use in the three jobs:
Job #1, $8,000;
Job #2, $14,000; and
Job #3, $45,000.
Direct material was issued to the Assembly Department:
Job #1, $500;
Job #2, $1,200; and
Job #3, $6,600. 3.
3. Time sheets and payroll summaries indicated that the following direct labor costs were
incurred:
Parts Fabrication Department Assembly Department
Job #1 $1,000 $2,400
Job #2 3,000 3,500
Job #3 5,000 9,500

4. The following indirect costs were incurred in each department:

Parts Fabrication Department Assembly Department
Labor $ 4,200 $4,500
Utilities/Fuel 5,900 2,300
Depreciation 10,300 3,600
The labor and utilities/fuel costs were accrued at the time of the journal entry.
 5. Overhead was applied based on the predetermined rates in effect in each department. The
Parts Fabrication Department had 200 MHs (20 MHs on Job #1, 35 MHs on Job #2, and 145
MHs on Job #3), and the Assembly Department worked 950 DLHs (40 DLHs on Job #1, 110
DLHs on Job #2, and 800 DLHs on Job #3) for the month.
6. Job #1 was completed and sold for cash in the amount of the cost-plus contract. At month-
end, Jobs #2 and #3 were only partially complete.
7. Any underapplied or overapplied overhead at month-end is considered immaterial and is
assigned to Cost of Goods Sold.
Required:
a. Record the journal entries for transactions 1–7.
b. As of the end of March 2010, determine the total cost assigned to Jobs #2 and #3.
Solution: REQUIRMENT 1
1. Raw Material Inventory 80,000
Accounts Payable 80,000
To record purchase of direct material

2. WIP Inventory—Parts Fabrication (Job #1) 8,000

WIP Inventory—Parts Fabrication (Job #2) 14,000
WIP Inventory—Parts Fabrication (Job #3) 45,000
Raw Material Inventory 67,000
To record requisition and issuance of direct material to Parts Fabrication Department
WIP Inventory—Assembly (Job #1) 500
WIP Inventory—Assembly (Job #2) 1,200
WIP Inventory—Assembly (Job #3) 6,600
Raw Material Inventory 8,300
To record requisition and issuance of direct material to Assembly Department

3. WIP Inventory—Parts Fabrication (Job #1) 1,000

WIP Inventory—Parts Fabrication (Job #2) 3,000
WIP Inventory—Parts Fabrication (Job #3) 5,000
Wages Payable 9,000
To record direct labor cost for Parts Fabrication Department
WIP Inventory—Assembly (Job #1) 2,400
WIP Inventory—Assembly (Job #2) 3,500
WIP Inventory—Assembly (Job #3) 9,500
Wages Payable 15,400
To record direct labor cost for Assembly Department

4. Manufacturing Overhead Control—Parts Fabrication 20,400

Manufacturing Overhead Control—Assembly 10,400
Wages Payable 8,700
Utilities/Fuel Payable 8,200
Accumulated Depreciation 13,900
To record various overhead costs
5. WIP Inventory—Parts Fabrication (Job #1) 2,000
WIP Inventory—Parts Fabrication (Job #2) 3,500
WIP Inventory—Parts Fabrication (Job #3) 14,500
Manufacturing Overhead Control—Parts Fabrication 20,000
To apply overhead in Parts Fabrication Department
WIP Inventory—Assembly (Job #1) 400
WIP Inventory—Assembly (Job #2) 1,100
WIP Inventory—Assembly (Job #3) 8,000
Manufacturing Overhead Control—Assembly 9,500
To apply overhead in Assembly Department

6. Finished Goods Inventory 14,300

WIP Inventory—Parts Fabrication 11,000
WIP Inventory—Assembly 3,300
To record completion of Job #1
Cash 17,875
Sales Revenue 17,875
To record sale of Job #1
Cost of Goods Sold 14,300
Finished Goods Inventory 14,300
To record CGS for Job #1

7. Cost of Goods Sold 1,300

Manufacturing Overhead Control—Parts Fabrication 400
Manufacturing Overhead Control—Assembly 900
To assign underapplied overhead to CGS

Job #1 costs = 8,000 + 500 + 1,000 + 2,400 + 2,000 + 400 = 14,300

Revenue, Job #1 = 14,300 x 1.25 = 17,875
REQUIRMENT 2. Job #2 Job #3
Direct material—Parts Fabrication 14,000 45,000
Direct labor—Parts Fabrication 3,000 5,000
Overhead—Parts Fabrication 3,500 14,500
Direct material—Assembly 1,200 6,600
Direct labor—Assembly 3,500 9,500
Overhead—Assembly 1,100 8,000
Totals 26,300 88,600