WATERWAYS CONTINUING PROBLEM

Chapter $20$

$($This is a continuation of the Waterways Problem from Chapter $19)$

WCP$20$ Waterways has two major public$-$park projects to provide with comprehensive irrigation in one

of its service locations this month. Job J$57$ and Job K$52$ involve $15$ acres of landscaped terrain which will

require special$-$order sprinkler heads to meet the specifications of the project. Using a job cost system to

produce these parts, the following events occurred during December.

Raw materials were requisitioned from the company$$s inventory on December $2$ for $$5,202$; on

December $8$ for $$1,200$; and on December $14$ for $$3,600.$ In each instance, two$-$thirds $(2/3)$ of these

materials were for J$57$ and the rest for K$52.$

Six time tickets were turned in for these two projects for a total amount of $18$ hours of work. All the

workers were paid $$16\mathrm{.}50$ per hour. The time tickets were dated December $3,$ December $9,$ and

December $15.$ On each of those days, $6$ labor hours were spent on these jobs, two$-$thirds $(2/3)$ for J$57$

and the rest for K$52.$

The predetermined overhead rate is based on machine hours. The expected machine hour use for

the year is $2,112$ hours, and the anticipated overhead costs are $$840,576$ for the year. The machines

were used by workers on projects K$52$ and J$57$ on December $3,9,$ and $15.$ Six machine hours were used

for project K$52(2$ each day$),$ and $8\mathrm{.}5$ machine hours were used for project J$57(2\mathrm{.}5$ the first day and $3$

each of the other days$).$ Both of these special orders were completed on December $15,$ producing $244$

sprinkler heads for J$57$ and $142$ sprinkler heads for K$52.$

Additional job order activities during this period of time included:

Dec. $1$ Purchased raw materials from Durbin Supply Company on account for $$50,320.$

Dec. $2$ Issued $$40,000$ of direct materials from the company$$s inventory to jobs other than K$52$ and

J$57$ and $$3,000$ of indirect materials.

Dec. $12$ Incurred Waterways$$ factory salaries and wages in the amount of $$64,000.$

Dec. $13$ Paid the factory$$s water bill of $$9,000.$

Dec. $18$ Transferred $$49,000$ of costs from other completed jobs to finished goods.

Dec. $21$ Paid the factory$$s electric bill of $$12,000$ for Waterways$$ factory.

Dec. $31$ Made adjusting entries for the factory that included accrued property taxes of $$12,000,$

prepaid insurance of $$8,000,$ and accumulated depreciation of $$16,800.$

Instructions

$($a$)$ Set up the job cost sheets for Job No$.$ J$57$ and Job No$.$ K$52.$ Determine the total cost for each

manufacturing special order for these jobs. $($Round unit cost to nearest cent.$)$

$($b$)$ Journalize the activities from these job cost sheets in the general journal. Also journalize the other

costs that occurred during this period of time.

$($c$)$ Assuming that Manufacturing Overhead has a debit balance of $$3,500,$ determine whether

overhead has been under$/$over applied and make the adjusting entry.

$($d$)$ Why would Waterways choose machine hours as the cost driver for the overhead rather than direct

labor cost? What would Waterways be likely to choose as the cost driver for the overhead for the

job of installing the irrigation system and why?