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Question: christophers custom cabinet company uses a job order cost system...

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Christopher’s Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balances at the beginning of 2016 follow:

Raw Materials Inventory $ 16,000
Work in Process Inventory 6,100
Finished Goods Inventory 20,400


The following transactions occurred during January:
(a) Purchased materials on account for $26,600.
(b) Issued materials to production totaling $20,300, 90 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials.
(c) Payroll costs totaling $16,600 were recorded as follows:
    $10,400 for assembly workers
     3,000 for factory supervision
     1,600 for administrative personnel
      1,600 for sales commissions
(d) Recorded depreciation: $4,600 for machines, $500 for the copier used in the administrative office.
(e) Recorded $1,000 of expired insurance. Forty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense.
(f) Paid $6,300 in other factory costs in cash.
(g) Applied manufacturing overhead at a rate of 200 percent of direct labor cost.
(h) Completed all jobs but one; the job cost sheet for this job shows $2,100 for direct materials, $2,200 for direct labor, and $4,400 for applied overhead.
(i) Sold jobs costing $51,200. The revenue earned on these jobs was $66,560.

Required:
1. Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts: (Post all amounts separately. Do not combine/add any dollar amounts when posting to the t-accounts.)

  1. Raw Materials Inventory.
  2. Work in Process Inventory.
  3. Finished Goods Inventory.
  4. Cost of Goods Sold.
  5. Selling, General, and Administrative Expenses.
  6. Sales Revenue.
  7. Other accounts (Cash, Payables, etc.).

2. Determine how much gross profit the company would report during the month of January before any adjustment is made for the overhead balance.



3. Determine the amount of over- or underapplied overhead.



4. Compute adjusted gross profit assuming that any over- or underapplied overhead balance is adjusted directly to Cost of Goods Sold.

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