Langley Ltd. uses a job costing system. At the beginning of the month of June, two orders were in process as follows:

There was no inventory in finished goods on June 1. During the month of June, orders numbered
106 through 120, inclusive, were put into process.
The only order in process at the end of June was order 120, and the costs incurred for this order were $1,150 of direct materials and $1,000 of direct labor. In addition, order 118, which was 100% complete, was still on hand as of June 30. Total costs for this order were $3,300.
The firm's overhead allocation rate in June was the same as that used in May and is based on labor cost. Direct materials requirements amounted to $13,000, direct labor costs for the month were $20,000, and actual manufacturing overhead recorded during the month amounted to $28,000.

REQUIRED
A. Prepare journal entries, with supporting calculations, to record the cost of goods manufactured, the cost of goods sold, and the closing of the over-applied or under-applied overhead to cost of goods sold.
B. Describe the two different approaches for closing over-applied or under-applied overhead at the end of the period. How do you choose an appropriatemethod?

Transcribed Image Text:

Direct materials Direct labor Overhead allocated Order 88 $1000 1,200 1,800 Order 105 $900 200 300