1. Bertrand purchased additional raw materials of $100,000 on account — Manufacturing uses job-order cost system and applies overhead production the basis direct

Bertrand Manufacturing uses a job-order cost system and applies overhead to production on the basis of direct labour costs. On January 1, 2016, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $30,000, direct labour $15,000, and manufacturing overhead $20,000. As of January 1, Job No. 49 had been completed at a cost of $120,000 and was part of finished goods inventory. There was a $25,000 balance in the Raw Materials Inventory account.

During the month of January, Bertrand Manufacturing began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $152,000 and $198,000, respectively. The following additional events occurred during the month:

1. Bertrand purchased additional raw materials of $100,000 on account.

2. It incurred factory labour costs of $75,000. Of this amount, $18,000 related to employer payroll taxes.

3. It incurred manufacturing overhead costs as follows: indirect materials $18,000, indirect labour $17,000, depreciation expense $14,000, and various other manufacturing overhead costs on account $22,000.

4. It assigned direct materials and direct labour to jobs as follows:

Instructions

(a) Calculate the predetermined overhead rate for 2016, assuming Bertrand Manufacturing estimates total manufacturing overhead costs of $1.5 million, direct labour costs of $750,000, and direct labour hours of 20,000 for the year.

(b) Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet for Job No. 50.

(c) Prepare the journal entries to record the purchase of raw materials, the factory labour costs incurred, and the manufacturing overhead costs incurred during the month of January.

(d) Prepare the journal entries to record the assignment of direct materials, direct labour, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in part (a). Post all costs to the job cost sheets as necessary.

(e) Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry (or entries) to record the completion of any job(s) during the month.

(f) Prepare the journal entry (or entries) to record the sale of any job(s) during the month.

(g) Calculate the balance in the Finished Goods Inventory account at the end of the month. What does this balance consist of?

(h) Calculate the amount of under- or over-applied overhead.

SOLUTION

(a) $1,500,000 ÷ $750,000 direct labour costs = 150% of direct labour costs

(b) See solution to part (e) for job cost sheets

Accounts Payable 100,000

Factory Labour 75,000

Factory Wages Payable 57,000

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Employer Payroll Taxes Payable 18,000

Manufacturing Overhead 71,000

Accounts Payable 22,000

Accumulated Depreciation 14,000

Raw Materials Inventory 18,000

Factory Labour 17,000

(d) Work in Process Inventory 89,000

Raw Materials Inventory 89,000

($12,000 + $42,000 + $35,000)

Work in Process Inventory 57,000

Factory Labour 57,000

($7,000 + $28,000 + $22,000)

Work in Process Inventory 114,000

Manufacturing Overhead 114,000

($57,000 × 150% of direct labour costs)

(e) See next page for postings to job cost sheets.

(b)&(e) Job Cost Sheets

	Job No. 50	Job No. 50	Job No. 50	Job No. 50	Job No. 50	Job No. 50	Job No. 50	Job No. 50	Job No. 50	Job No. 50	Job No. 50	Job No. 50	Job No. 50
	Date	Date			Direct Materials	Direct Materials			Direct Labour	Direct Labour		Manufacturing Overhead	Manufacturing Overhead
	Beg. Jan.	Beg. Jan.			$30,000 12,000 $42,000	$30,000 12,000 $42,000			$15,000 7,000 $22,000	$15,000 7,000 $22,000		$20,000 14,000 $34,000	$20,000 14,000 $34,000
	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000	Cost of completed job Direct materials $42,000 Direct labour 22,000 Manufacturing overhead 34,000 Total cost $98,000
*$7,000 × 150%

	Job No. 51	Job No. 51	Job No. 51	Job No. 51	Job No. 51	Job No. 51	Job No. 51	Job No. 51	Job No. 51	Job No. 51	Job No. 51	Job No. 51
	Date			Direct Materials	Direct Materials			Direct Labour	Direct Labour		Manufacturing Overhead	Manufacturing Overhead
	Jan.			$42,000 $42,000	$42,000 $42,000			$28,000 $28,000	$28,000 $28,000		$56,000 $56,000	$56,000 $56,000
	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000	Cost of completed job Direct materials $ 42,000 Direct labour 28,000 Manufacturing overhead 56,000 Total cost $126,000
**$28,000 × 150%

		Job No. 52	Job No. 52	Job No. 52	Job No. 52	Job No. 52	Job No. 52	Job No. 52	Job No. 52
		Date		Direct Materials	Direct Materials	Direct Labour	Direct Labour	Manufacturing Overhead	Manufacturing Overhead
		Jan.		$35,000	$35,000	$22,000	$22,000	*$44,000*	*$44,000*
	***$22,000 × 150%
	Finished Goods Inventory		224,000
		Work in Process Inventory		224,000
		($98,000 + $126,000)
(f)	Cost of Goods Sold		218,000
		Finished Goods Inventory		218,000
		($120,000 + $98,000)
	Accounts Receivable		350,000
		Sales		350,000
		($152,000 + $198,000)

	Finished Goods Inventory	Finished Goods Inventory
Beginning balance Cost of completed jobs 50 and 51	120,000 224,000	218,000	Cost of jobs 49 and 50 sold
Ending balance	126,000
The balance in this account consists of the cost of completed Job No. 51 which has not yet been sold.

(h)

	Manufacturing Overhead	Manufacturing Overhead
	Actual 71,000	Applied 114,000
	43,000
	The balance indicates that manufacturing overhead was over-applied by $43,000.