Preparing Entries for Manufacturing Costs
Roy’s Appliance Repair Shop uses a job order costing system to track the cost of each repair. Roy’s applies its “garage or shop” overhead at a rate of $25 per direct labor hour spent on each repair. Roy’s uses the following accounts to track the cost of all repairs:
The following transactions occurred during the most recent month:
(a) Purchased raw materials (parts and supplies) on account $21,000.
(b) Used $16,000 in raw materials (parts and supplies). Of this, $14,000 was for major parts that were traceable to individual repair jobs, and the remainder was for incidental supplies such as lubricants, rags, fuel, and so on.
(c) Recorded a total of $8,000 in direct labor cost (for 400 hours) that are owed but not yet paid.
(d) Applied overhead to repair jobs at a rate of $25 per direct labor hour.
(e) Recorded the following actual overhead costs:
(f) Completed repair jobs costing $45,000 and charged customers at cost plus 30 percent. (Note: You can bypass the Finished Goods Inventory account, which is not appropriate in this context.)
Required:
Prepare journal entries for transactions (a) – (f) using the account names shown and other appropriate accounts such as Cash, Payables, Accumulated Depreciation, Prepaid, and Sales Revenue.