Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead costs to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,800,000 in manufacturing overhead cost at an activity level of 240,000 machine-hours. The company spent the entire month of January working on a large order for 16,000 custom made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:a. Raw materials purchased on account, $325,000.b. Raw materials requisitioned for production, $290,000 (80% direct materials and 20% indirect materials).c. Labor cost incurred in the factory, $180,000 (one-third direct labor and two-thirds indirect labor).d. Depreciation recorded on factory equipment, $75,000.e. Other manufacturing overhead costs incurred, $62,000 (credit Accounts Payable).f. Manufacturing overhead cost was applied to production on the basis of 15,000 machine-hours actually worked during the month.g. The completed job was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)1.Prepare journal entries to record items (a) through (f) above. [Ignore item (g) for the moment.2.Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts.3.Prepare a journal entry for item (g) above4.Compute the unit product cost that will appear on the job cost sheet.

Manufacturing is termed as the process that produces the finished goods involving the raw materials in the machines. Production is termed as the process that involves the process of manufacturing the goods and services or the products.

1. and 2. The journal entries and the calculation of the T-account for the Manufacturing Overhead and Work in Process are attached below.

Working notes:

Manufacturing overheads = 300000

[tex]\$20\times15000 = \$300000[/tex]

Predetermined Overhead rate = [tex]\frac{\text{Total Budgeted Overhead cost}}{\text{Total budgeted machine hours}}[/tex]

= [tex]\frac{4800000}{240000} = \$20/ \:Machine\: Hours[/tex]

3. The Journal entry for the (g) is the finished goods are debited and the work in progress has been credited with the amount 592000.

4. Unit product Cost = [tex]\frac{592000}{ 16000 } = \$37[/tex]

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