Question

Townsend Industries Inc. manufactures recreational vehicles. Townsend uses a job order cost system. The time tickets from November jobs are summarized as follows:

Job 201 $6,240
Job 202 7,000
Job 203 5,210
Job 204 6,750
Factory supervision 4,000

Factory overhead is applied to jobs on the basis of a predetermined overhead rate of $18 per direct labor hour. The direct labor rate is $40 per hour.

Required:
a. Journalize the entry to record the factory labor costs.
b. Journalize the entry to apply factory overhead to production for November.

Answer 1

Answer:

Part a

Debit  : Work in Process - Job 201    $6,240

Debit  : Work in Process - Job 202   $7,000

Debit  : Work in Process - Job 203    $5,210

Debit  : Work in Process - Job 204   $6,750

Debit :  Overheads    $4,000

Credit : Wages Payable $29,200

Part b

Debit  : Work in Process $11,340

Credit : Overheads $11,340

Explanation:

To apply overheads, determine the total direct labor hours for each job

Direct labor hours = Total direct labor Cost ÷ Direct labor rate

therefore,

Job 201  = $6,240 ÷ $40 = 156

Job 202 = $7,000 ÷ $40 = 175

Job 203 = $5,210 ÷ $40 = 130

Job 204 = $6,750 ÷$40 = 169

Total                                 = 630

Overheads applied = $18 x 630 hours = $11,340