Comprehensive problem--chapter 2

Job order costing system=custom

Pacific Pool Company (PPC) builds custom swimming pools for homeowners in California, Arizona, and
Nevada. PPC uses material requisition forms and direct labor tickets to trace direct materials and direct
labor costs to specific jobs. Manufacturing overhead is applied to jobs at a rate of $100 per direct labor
hour (DLH). During the first month of operations, the company recorded the following transactions.

a. Purchased $20,000 in raw materials. Raw material inventory

b. Issued the following materials to production:

-- $130,000 was directly traceable to specific jobs. Direct materials used
-- $20,000 was not directly traceable to specific jobs. Actual manufacturing overh

c. Recorded the following labor costs--paid in cash:

-- Direct labor of $50,000 Direct labor
-- Construction supervision of $30,000 Actual manufacturing overh

d. Recorded the following actual manufacturing overhead costs:

-- Construction insurance of $5,000 Actual MOH
-- Construction equipment depreciation of $25,000 Actual MOH
-- Pool permits and inspections of $5,000 Actual MOH

e. Recorded the following nonmanufacturing costs:

-- Office equipment depreciation of $3,000 Selling, general, & admin
-- Rent and insurance on owner's company car of $2,000 Selling, general, & admin
-- Advertising costs of $10,000 Selling, general, & admin

f. Applied manufacturing overhead to jobs in process based on 900 direct labor hours.
900 direct labor hours (cost driver) *100 Applied MOH

g. Completed 15 pools at a total cost of $195,000

Cost Flow:Moved $195,000 of cost out of Work In progress Inventory and placed the cost in Finished Goo

h. Finalized the sale of 13 pools that cost a total of $176,000. The other 2 pools are completed
and awaiting inspection by the customer before the sale is finalized.
13 completed and sold = $176,000 is coming out of Finished Goods Inventory and moving to C
2 remaining pools = $19,000 still in Finished Goods Inventory

i. Recorded sales revenue of $325,000 on the 13 pools that were sold.

Sales revenue $ 325,000.00
j. Closed manufacturing overhead account balance to cost of goods sold.

OH Control
Actual Applied
$ 85,000.00 $ 90,000.00 << recorded in WIP inventory, transferred to FG inventory, and fin
ornia, Arizona, and
terials and direct $100 predetermined overhead rate Applied MOH
0 per direct labor fixed overhead (rent, depreciation, property tax, salaries)
g transactions. variable overhead (indirect labor salaries and indirect materials)

Raw material inventory $200,000

Direct materials used $ 130,000.00

Actual manufacturing overhead $ 20,000.00

Direct labor $ 50,000.00

Actual manufacturing overhead $ 30,000.00

Actual MOH $ 5,000.00

Actual MOH $ 25,000.00
Actual MOH $ 5,000.00

Selling, general, & admin $ 3,000.00

Selling, general, & admin $ 2,000.00
Selling, general, & admin 10,000

$ 90,000.00 <<guess… but is it correct

aced the cost in Finished Goods Inventory

re completed

s Inventory and moving to COGS

erred to FG inventory, and finally recognized in COGS
Show how all costs would flow through the following accounts.

900*100

ACTUAL APPLIED
POHR=total budget OH/Estimated total cost Driver
 Cost of goods manufactured schedule
should be summarize what happened in work in process invetory
Direct material USED
Bginning RM inventory 0
Add--Rm purchases $ 200,000.00
RM available for use $ 200,000.00
Less--indirect materials -20,000
Less--ending RM inventory balance -50,000
Direct materials used 130,000

Direct labor $50,000

Manufacturing overhead --APPLIED

$100*900 direct labor hours worked $90,000

Total current manufacturing cost $270,000

Add--beginning WIP inventory balance 0

Less--ending WIP invetory balance -75,000

Cost of goods manufactured $19,500

 COST OF GOODS SOLD SCHEDULE
finished goods inventory summary

Bignning FG inventory 0
Plus--COGM $ 195,000.00
Less--ending FG inventory -19,000 (still in FG inventory
Unadjusted COGS $176,000 overstated
less--overapplied MOH -5000
Adjusted COGS $171,000
 Pacific Pool company
Income statement

Sales Revenue $ 325,000

Less:COGS $ 171,000
Gross Profit $ 154,000
Less: SG&A expenses $ 15,000
Net Income $ 139,000
DM USED+DL+Applied MOH

Direct material used

Beginning RM inventory 35,900
Add--RM purchases 304,600
RM available for use 340,500
Less indirect material -17,000
Less ending RM inventory -40,450
Direct materials used 283,050

Direct Labor 275,700

Manufacturing overhead--applied 217803 <<,79% *275,700

POHR=75% of DL cost

Total CURRENT manufacturing costs 776,553

ADD--Beginning WIP inventory 110,700

Less--Ending WIP inventory -121,000

costs of good sold 776,553