Mathews Guitar Company makes high-quality customized guitars. Mathews uses a job order costing system.
Because the guitars are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company estimated that total manufacturing overhead costs would be $105,000 and that 21,000 direct labor hours would be worked.
At year-end, Dave, the company's founder and CEO, gives you the following information regarding Mathews's operations:
1. The beginning balances in the inventory accounts were:
Raw Materials Inventory......... $ 5,000
Work in Process Inventory...... $34,000
Finished Goods Inventory....... $48,000

2. During the year, the company purchased raw materials costing $75,000.
3. The production department requisitioned $60,000 of raw materials for use in production.
Of those, 70% were direct materials and 30% were indirect materials.
4. The company used 20,800 direct labor hours at a cost of $12 per hour during the year (credit Wages Payable).
5. The company used 4,000 indirect labor hours at a cost of $8 per hour (credit Wages Payable).
6. The company paid $45,000 for insurance, utilities, and property taxes on the factory.
7. The company recorded factory depreciation of $15,000.
8. The company applied manufacturing overhead to inventory based on the 20,800 labor hours actually worked during the year.
9. Products costing $398,000 were completed during the year and transferred to the Finished Goods Inventory.
10. During the year, the company sold products costing a total of $404,000.
11. The company closes under- and over applied overhead to Cost of Goods Sold.


a. Prepare journal entries for each of the transactions just listed.
b. Using the information in the entries, record the transactions in T-accounts for Raw Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Manufacturing Overhead, and Cost of Goods Sold. Show the ending balances for all accounts.

  • CreatedFebruary 21, 2014
  • Files Included
Post your question